Investing

SEC Issues Charges Against Unregistered Fund Manager

Chris Lange

Published: March 10, 2016 12:45 pm

Last Updated: January 13, 2020 12:06 pm

The U.S. Securities and Exchange Commission (SEC) recently announced fraud charges against an unregistered fund manager accused of hiding his checkered past while providing false and misleading data to investors and an independent research firm.

The SEC alleges that Steven Zoernack deceived investors by spreading false and misleading fund information while doing everything possible to bury his criminal history and troubling financial record.

It’s also worth mentioning that neither Zoernack nor his funds were registered with the SEC or any state regulator.

According to the SEC, the allegations against Zoernack and EquityStar Capital Management are:

• They fraudulently offered and sold at least $5.6 million of interests in a pair of private investment funds (Global Partners Fund and Momentum Growth Fund) to more than 40 investors from May 2010 to March 2014.
• Zoernack secretly made more than $1 million in unauthorized withdrawals from the funds’ accounts without informing investors.
• Zoernack and EquityStar took extensive measures to hide Zoernack’s background that included two felony fraud convictions, a bankruptcy filing, and other money judgments and liens against him.
• Zoernack even hired a firm to manipulate search results on his name by flooding the Internet with misleading information indicating he was a successful fund manager, investor, and philanthropist. This made it harder for investors to discover Zoernack’s criminal convictions and other negative information in Internet searches.
• Zoernack used at least three false identities while communicating with investors to make Equity Star sound like more than a one-man operation. For example, he created a nonexistent woman named Amanda Sutton who carried the title: Investor Relations Professional.
• Zoernack and EquityStar provided false and misleading data to Morningstar Inc. so the Momentum fund could attain the title of “Morningstar Five-Star-Rated Fund” under false pretenses and Zoernack could market the fund as highly-rated.
• For example, Zoernack misrepresented to Morningstar that the fund existed longer than it actually did, and falsely claimed the assets were 40 times higher than they actually were.
• Zoernack and EquityStar created and distributed false and misleading investment marketing materials that didn’t adequately indicate that results were hypothetical and not based on actual fund performance.