I spent about 30 minutes debating that this is not true yet my opposition refuses to accept my points. Unfortunately I do not have proof, so proof would be appreciated.

I would let it go because since hedge funds generally only divulge financials to the SEC and investors, it may be hard to get actual proof of where their money goes.

Morningstar does report on some hedge funds, see the link below

Hedge Fund Performance, Fund of Funds, Research, Returns, Lists | Morningstar

I think most hedge funds are legit, but their fees are beyond ridiculous. My favorite quote (I think from The Economist, but I can't be sure) - "Hedge Funds are a payment scheme disguised as an asset class"