SEC Charges Former $1 Billion Hedge Fund Advisory Firm

This is no case of Bernie Madoff, but the Securities and Exchange Commission has charged a former $1 billion hedge fund advisory firm and two executives with “scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors.” Today’s charge is said to be the seventh such case arising from the SEC’s Aberrational Performance Inquiry.

Today’s SEC complaint was filed in the U.S. District Court for the Southern District of New York. More specific in the charges is that the SEC found lies to investors and found lies to the firm’s auditors, as well as a scheme to inflate fees by grossly overvaluing fund assets.

The SEC has alleged that New Jersey-based Yorkville Advisors LLC, founder and president Mark Angelo, and chief financial officer Edward Schinik “enticed pension funds and other investors to invest in their hedge funds by falsely portraying Yorkville as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure.” Today’s charge shows that the men misrepresented the safety and liquidity of investments made by the hedge funds. It also shows that the mean charged excessive fees to the funds based on fraudulent and inflated investment values.

FULL 35 PAGE SEC COMPLAINT

JON C. OGG