Secretary of the Commonwealth of Massachusetts William Galvin has filed civil fraud charges against Moser Capital Management and investment adviser Nicklaus J. Moser. Galvin’s office is accusing Moser and his firm of fraud involving two venture capital funds: the Moser Capital Fund, LLC and the Moser Capital Fund II, LLC.
The state regulator claims that the respondents engaged in fraudulent conduct and breached their fiduciary duties. The breaches alleged include making misrepresentations and omissions to investors and prospective investors by providing misleading information, not getting “valid investor signatures” when receiving more capital contributions, and charging a performance fee to the non-qualified account of an advisory client.
According to Galvin’s office, Moser set up the funds to raise cash for start-up companies. The investment adviser was allegedly a sales representative at a company that sold products to startup ventures, but he did not tell investors that he had financial reasons for making sure that the start-ups in operation.
As an example of the alleged violations, Moser and his financial firm are accused of claiming in a company brochure that they management endowment funds, which was never the case. Moser also disclosed on one fund’s website that his firm and others collectively oversaw more than $2B of “equity and fixed income assets” when, in truth, they managed less than 1% of such funds.
In regard to the improperly charged performance fee, which was assessed on one senior investor’s account, Moser is accused of testifying that he “householded” the net worth of that client with that of the latter’s nephew so that the client would satisfy the net worth requirement. This allowed Moser to charge the client the performance-based fee. However, Massachusetts and federal securities laws only allows a spouse to be householded when determining net worth.
The state said that Moser used investors’ funds to pay business debts, cover more than $76K on grocery deliveries, restaurants, and other personal expenses, lend one company executive more than $100K, and pay over than $45K in bonuses.
Galvin’s office wants a permanent cease and desist order for Moser’s registration as an investment adviser to be revoked, disgorgement of ill-gotten gains, a censure, investor restitution, and an administrative fine.
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