Wednesday, October 5, 2011

SEC Charges Fund Manager with Fraud In PIPE Transactions

The SEC has charged a Long Island-based investment adviser with defrauding investors in hedge funds investing in PIPE transactions and misappropriating more than $1 million in client assets for his personal use. A “PIPE” transaction involves “private investment in public equity.” Microcap public companies often engage in PIPE transactions to raise capital.

The SEC alleges that the advisor and his firm The NIR Group LLC repeatedly lied to investors to hide the truth that his PIPE investment and trading strategy was failing during the financial crisis. The advisor misused investor money by writing checks to pay for personal services and luxury items such as a Lexus, Mercedes, and Rolex watch.

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