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.
According to the regulator’s securities fraud complaint, from 8/2009 through at least 6/2018, Meyer and Statim offered and sold different classes of limited partnership interests in Arjun, while promising investors in one class protection from losses as long as they “surrendered” part of their profits. Meantime, other investors in two of the classes were told they stood to make guaranteed fixed returns.
The SEC is accusing Meyer of taking most of these surrendered profits and using the money to support his own lifestyle. He then allegedly sought to deceive investors by noting in Arjun’s books that there was a receivable owed by Statim. The investment adviser then claimed to “pay down” the receivable, which he did but only by using money out of Arjun, rendering the “No Loss Protection” and the guaranteed returns “illusory” because nothing was backing them except for the receivable.
The Commission said that Statim and Meyer owed the fund and its investors a fiduciary interest. The regulator accused them both of misrepresenting Arjun’s financial performance, portfolio holdings, and assets under management, as well as engaging in “deceptive means” so that investors would not “redeem their investments.” The SEC wants the defendants to disgorge ill-gotten gains, as well as pay prejudgment interest and civil penalties.
In January, investors who had entrusted their money to Statim and Meyer filed a proposed class action securities fraud lawsuit against the hedge fund, Opus Fund Services USA LLC, Meyer, and his father-in-law Dr. Bhagirath Majmudar. According to the Atlanta Journal-Constitution, many of the investors who worked with Meyer were reportedly members of “Atlanta’s elite Indian community.” Meyer’s wife Nija Majmudar, was reportedly friends with a number of them.
One of the lead plaintiffs in the class action securities case, Nilsa Nieves, told the AJC that she and her husband had invested $500K through Meyer. The couple was among the investors who were promised they wouldn’t suffer losses as long as they gave up a chunk of their profits and agreed to a “10-year lock-down period” or they would risk losing half of their money. In its complaint, the SEC noted that the 10-year requirement could be seen as “fraudulent conduct” because “deceptive means” were used to dissuade investors from seeking a redemption of their investments.
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