Tuesday, August 12, 2014

SEC Charges Bahamas-Based Brokerage Firm and President With Facilitating Fraudulent Scheme by Hedge Fund Manager

The SEC has charged a Bahamas-based brokerage firm and its president with enabling a fraud that was halted when the SEC charged the hedge fund manager at the center of the scheme.
The SEC alleges that the president and his firm Alliance Investment Management Limited (AIM) purported to be the “custodian” for assets under the management of another individual.  The SEC obtained a court-ordered freeze over the manager's assets after charging him in 2012 with defrauding investors around the world by hiding major losses while falsely boasting that their investments were performing remarkably during the financial crisis. 

According to the SEC’s complaint filed today against the president and AIM in federal court in Chicago, they misrepresented themselves to investors as the manager's custodian when, since at least 2009, their firm did not have custody of most of the assets listed on investor account statements.  The president and AIM allowed the manager to create false account statements on AIM letterhead that vastly overstated the value of investors’ assets by more than $150 million.  The president and AIM then routinely provided the false account statements to auditors and others acting on behalf of the manager's investors. 
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