Articles Posted in Hedge Funds

The US Securities and Exchange Commission (SEC) is accusing a recent college graduate of running a Ponzi fraud that targeted young investors, including college students and other recent graduates. The regulator announced its emergency action against Syed Arham Arbab, Artis Proficio Capital Management, LLC, and Artis Proficio Capital Investments, LLC this week. It wants an asset freeze, emergency relief, civil penalties, and the repayment of allegedly ill-gotten earnings along with prejudgment interest.

At least eight college students, recent college graduates, or their relatives invested over $269K in the alleged hedge fund fraud. According to the regulator’s complaint, Arbab ran his scam out of a fraternity house close to the University of Georgia campus. He is a recent alumni and is accused of using his college connections to perpetuate his alleged scam.

According to the SEC’s complaint, Arbab sold investments in Artis Proficio Capital, a supposed hedge fund, that he touted as making up to 56% returns the year before, and he supposedly guaranteed up to $15K of investor money. Investors who purchased bond agreements were told that their money would be returned with a fixed return rate.


SEC Accuses Investment Adviser of Misappropriating Funds from Hedge Funds

The US Securities and Exchange Commission (SEC) has secured an emergency asset freeze, as well as a temporary restraining order, to stop an ongoing allegedly fraudulent securities offering that was purportedly conducted to conceal the misappropriation of about $570K from hedge fund clients. The regulator contends that investment adviser Eric D. Lyons and his investment advisory businesses, Synchronicity Capital GP, LLC, Synchronicity Capital Group, and Synchronicity Group, LLC, used the money to pay for Lyons’ personal spending, including Broadway shows, concert tickets, sailing expenses, rent, and other costs.

According to the regulator’s complaint, the allegedly fraudulent securities offering involved securing about $300K from one investor who thought other large investors would be potentially involved and that there was a $100M business valuation. The SEC alleges that, in total, the Synchronicity entities and Lyons raised about $700K through both the misappropriation of funds and the allegedly fraudulent offering.

Raymond Montoya, a former Boston hedge fund manager, is sentenced to 14 years in prison. According to the US Attorney’s Office for the District of Massachusetts, Montoya, 70, pleaded guilty to multiple counts of wire fraud, mail fraud, and charging an unlawful monetary transaction after the government accused him of deceiving investors of his RMA Strategy Opportunity Fund and costing them more than $30M.

The ex-hedge fund manager and owner of Research Magnate Advisors admitted to stealing money to support his luxury lifestyle. Some of his victims were his own friends and relatives.

Investors in the RMA Strategy Opportunity Fund were under the impression that the fund held more money than it actually did. Meanwhile, Montoya falsely touted possession of proprietary software that could help make wise investment choices involving bonds and stocks and would supposedly lead to returns. The investor fraud went on from at least 2009 to about mid-2017, which is when Massachusetts Secretary of the Commonwealth William Galvin brought a civil fraud case against Montoya.

According to The Wall Street Journal, three hedge funds that own Puerto Rico general obligation (GO) bonds have set up their own committee in an effort to get paid back the money they are owed. Court records indicate that GoldenTree Asset Management, Monarch Alternative Capital, and Whitebox Advisers, which collectively own about $800 million of GO debt, want to distinguish themselves from the other bondholders whose claims have recently come under question.

Their committee formation comes just weeks after Puerto Rico’s fiscal oversight board,known as the Financial Oversight and Management Board (the “Board”), raised questions about whether $6 billion in general obligations are valid. The bonds at issue were sold after March 2012, including $3.5 billion of high yield general obligations that the island sold in 2014. Monarch, Whitebox, and GoldenTree purchased their GO bonds prior to March 2012.

Puerto Rico Continues to Owe Over $70 billion in Debt.

The US Securities and Exchange Commission has filed civil charges against Statim Holdings, Inc. and its owner Atlanta investment adviser, Joseph A. Meyer. The regulator is accusing them of defrauding the private fund Arjun L.P., which they managed, and its investors.

Arjun, set up by Meyer in 2007, is a pooled investment vehicle. Its records indicate that its assets under management have never gone over $45M. By the middle of 2009, about 40 investors had invested in the fund, which had lost almost 36% of its value as a result of trading losses.

However, Meyer reported high return rates for Arjun, which caused investors to jump on board. In 2015, Bloomberg News and other services even ranked Arjun as among the best performing hedge funds. Yet it was also at around this time that then-Georgia Secretary of State Brian Kemp, who is now governor, notified Bloomberg that his office was looking into “irregularities” involving Arjun and its owner. The following year, Bloomberg raised questions about Arjun’s performance. In 2017, the SEC opened its own probe into the hedge fund firm and its owner.


Man Who Ran RMA Strategic Opportunity Fund Ponzi Scam Pleads Guilty

Raymond K. Montoya, a Boston hedge fund manager, has pleaded guilty to operating a multi-billion dollar Ponzi scam involving the RMA Strategic Opportunity Fund, LLC. Montoya pleaded guilty to multiple counts of mail fraud, wire fraud, and conducting an unlawful monetary transaction.

Montoya was charged and arrested last year. His victims included relatives, friends, and people he knew. They invested millions of dollar, including their savings and retirement funds.

The SEC has filed fraud charges against hedge fund adviser Gregory Lemelson and his Massachusetts based investment advisory firm Lemelson Capital Management LLC. The regulator is accusing them of illegally profiting over $1.3M from an alleged short-and-distort scheme that involved Ligand Pharmaceuticals.

According to the hedge fund fraud allegations, Lemelson and his investment advisory firm put out false information about the San Diego-based pharmaceutical company after the hedge fund adviser took a short position in Ligand for The Amvona Fund. Lemelson is a part owner and advisor of this other hedge fund.

The SEC’s complaint said that Lemelson’s false statements were meant to rattle investor confidence in Ligand, drive its stock price down, and increase his short-position’s value. He allegedly used interviews, written reports, and social media to disperse the false claims.

Murray Huberfeld, a Platinum Partners principal, has pleaded guilty to allegations that he was involved in a wire fraud conspiracy. However, he has not admitted a guilty plea to related to an alleged $1B scam involving his hedge fund.

Huberfeld admitted to misleading his hedge fund when he falsely claimed that a $60K payment was to pay for Knicks tickets when, in truth, it was a bribe to ex-New York City jail union boss Norman Seabrook to invest pension cash.

The money had been issued to fixer Jona Rechnitz. She has since turned government witness in a number of federal corruption probes. The bribe resulted in the Correction Officers Benevolent Association investing $20M in Platinum.

Yasuna Murakami, a hedge fund manager who oversaw  MC2 Capital Management LLC  And MC2 Canada Capital Management LLC, is  sentenced to six years in prison for fraud. Prosecutors accused him of defrauding hedge fund investors. Additionally, Murakami, must pay over $10.5M in investor restitution.

Police arrested the Massachusetts hedge fund manager last year. When pleading guilty to wire fraud, Murakami acknowledged that he diverted millions of dollars in investor monies to his own personal and business accounts, as well as used their funds to pay for a luxury sports car, make credit card payments, travel abroad, make purchases at expensive department stores, initiate investments on his own behalf, and issue Ponzi-like payments to investors.

Yasuna Murakami and Former Business Partner Were Working Together to Defraud Investors 

Martin Shkreli to Go to Prison for Seven Years

A federal judge has sentenced former hedge fund manager Martin Shkreli to seven years behind bars. Shkreli was found guilty of defrauding investors of his MSMB Capital Management hedge fund while manipulating the stock of his drug company Retrophin.

His defense team had fought for a lower sentence—12 to 18 months. They pointed out that ultimately none of the investors that Shkreli bilked lost money and he didn’t profit from his fraud. Prosecutors countered that, in fact, Shkreli had caused anywhere from $9M to $20M in losses.

A few days before his criminal sentence was issued, Judge Kiyo Matsumoto ordered that about $7.36M of the ex-hedge fund manager’s assets be surrendered, including a rare Wu-Tang Clan album that he purchased for $2M. Shkreli’s legal team plans to appeal the sentence.

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