Wayne Huizenga, founder of Waste Management and owner of the Miami Dolphins, is suing Chicago-based hedge fund Ritchie Capital Management for fraud after a possible "total loss." The action highlights the dangers of investing in the lightly regulated hedge fund industry. The complaint, filed in April in Chicago’s Cook County Circuit Court, alleges that Ritchie Capital provided false and misleading materials, failed to disclose important facts and had discrepancies in its financial books. Huizenga Managers Fund, wealth manager for the Huizenga family, says it received a reassuring update from the hedge fund in June last year, which included a chart showing that the fund, in which the family invested $10.6 million, was well diversified. But this was not the case, the lawsuit claims. The fund was devoted almost entirely to a controversial vehicle, known as death bonds, where life insurance policyholders sell their policies to an investor who collects the benefit on their death. Ritchie, and partner Coventry First of Pennsylvania, had assembled hundreds of policies, which they planned to tie to death bonds to sell to other investors. In May, Ritchie sued Coventry for fraud, seeking $2.1 billion. The suit was dismissed last month, but Ritchie said it would refile. Now the Huizengas, whose fortune was made in trash hauler Waste Management, allege they were defrauded. Ritchie Capital says it made no promises to diversify. “Legal action has been a rare last resort, but unfortunately we felt we were given no option,” Peter Huizenga Sr, said in a statement. Ritchie Capital’s July 30 court filing describes the Huizenga Managers Fund, as “a sophisticated investor that made a high-risk investment” with the full understanding it could lose its money. Ritchie Capital argued that it’s not liable. Ritchie, which had $2.8 billion under management as recently as October, reported double-digit returns from its start in 1997 through 2004. This year, it began selling off parts of the business and in April sold $1 billion in assets to competitor Reservoir Capital Group in New York. Now it has begun the process of selling the life insurance policies, bankruptcy court filings show.