Philip Falcone, who made a fortune by speculating on the collapse of the US sub-prime mortgage market, has agreed to pay an $18 million settlement with the Securities and Exchange Commission for manipulating the market and using client funds to pay his taxes, according to media reports.

In June last year, Falcone was sued by US regulators for allegedly borrowing money improperly from his fund to pay his tax bill. He was also accused by the SEC of breaching rules by offering major investors preferential treatment when Harbinger was restructured in 2009.

Falcone and his hedge fund, Harbinger Capital, reportedly announced last week they had reached an agreement to settle the charges, which include “favoring certain clients over others,” the UK's Guardian said.

Falcone has agreed to a two-year bar from working as an investment advisor, although he may continue to act as chief executive and chairman of Harbinger, the report said, citing a regulatory filing.

Harbinger is prohibited from raising new funds for the two-year period. The company must, meanwhile, take “all actions reasonably necessary” to return money to investors wishing to exit Harbinger funds.

The agreement has yet to be approved by the SEC’s commission and also requires court approval. Falcone could, once the two years are up, seek approval from the SEC to lift the ban.

At present, Falcone has a fortune estimated to be worth $1.3 billion, the report said. He has moved on to private equity investments in companies such as Spectrum Brands, which owns consumer products, it added.