SEC rejects settlement with hedge fund billionaire The settlement would have barred Falcone from critical hedge fund activities for two years - such as raising new funds or being involved in dealmaking through his firm. But it did not require him to admit wrongdoing, and it allowed him to remain chief executive of Harbinger Group. The SEC has been harshly criticized by some judges for using in many settlements boilerplate language that does not require an admission of guilt from defendants. In June, SEC Chairman Mary Jo White said the agency would start requiring such admissions in certain types of civil settlements, and the agency told its staff that defendants engaged in "egregious intentional misconduct" may justify admissions, as would obstruction of an SEC investigation or "misconduct that harmed large numbers of investors." It is unclear whether this new policy is at play in the Falcone case. Neither Falcone nor the SEC could be immediately reached for comment. The preliminary settlement deal, which was disclosed by Harbinger in May, also would have required Falcone's hedge fund, Harbinger Capital Partners, to pay $18 million to settle two civil law suits brought last year by the SEC. The settlement was only preliminary and needed approval from the SEC's five commissioners and a federal court. The agency accused Falcone of leading a "lavish lifestyle" while working to limit the ways clients could pull out of their investments. In one instance, Falcone took out a $113.2 million loan from one of his hedge funds to pay personal taxes while most of the fund's investors were unable to access their money. The agency also alleged that Falcone and others in his firm manipulated the bond prices of Maax, which manufactures bathroom fixtures. The agreement struck by the SEC's enforcement division called for Falcone to pay $4 million of the fine - likely a tiny portion of his net wealth - and for Harbinger Capital to pay the rest, according to a person familiar with the matter who spoke on the condition of anonymity because the settlement is not final. Falcone's fame grew quickly across Wall Street after he bet against subprime mortgages right before those loans sparked a credit crisis that threatened to topple the financial system. He used his wealth to gain allies in Washington, critics say, contributing to both Democratic and Republican campaigns. And he frequented Washington as he attempted to push through a venture called LightSquared, which proposed using satellites to create a cellular network that could compete with AT&T's and Verizon's. Falcone's $3 billion bet on LightSquared proved ill-fated. The Federal Communications Commission, after initially embracing the plan, turned on it last year after other federal agencies complained that the technology could interfere with GPS devices and airplane systems.