NEW YORK (HedgeWorld.com)–The Honorable Naomi R. Buchwald, a judge of the U.S. district court for Manhattan, entered a final judgment in the Securities and Exchange Commission’s lawsuit against Peter W. Chabot and Chabot Investments Inc., for violations of the antifraud provisions of the federal securities laws.
Two days later, on June 27, the court entered a notice of voluntary dismissal against three co-defendants, The Synergy Fund LLC, Sirens Investments Inc. and Sirens Synergy, because the SEC has now informed it that they do not exist.
The court found that, beginning in 1999, Mr. Chabot, the founder of Chabot Investments Inc., an unregistered investment adviser, raised more than US$1.1 million from approximately 14 investors by making material misrepresentations concerning fictitious hedge funds.
The SEC itself was duped by the alleged existence of Sirens Synergy and the two related entities–at least to the extent of naming the three phantoms in the lawsuit filed in November 2001, one week after Mr. Chabot’s arrest on related criminal charges.
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The 2001 complaint, filed with the federal district court for Manhattan, alleged that Mr. Chabot had told investors that he was an experienced trader and that he had developed a mathematical model to predict when to buy stocks and whether to take long or short positions. It also charged that he had not bought stocks or other securities with investors’ funds, but had used the money for personal expenses, such as world travel, limousine services, New York Knicks basketball games, furniture, oriental rugs and jewelry.
On Jan. 8, 2002, Mr. Chabot pleaded guilty to one count of securities fraud and one count of wire fraud Previous HedgeWorld Story. Seven weeks later, the court sentenced him to 27 months in prison, ordering him also to undergo treatment for drug addiction and to repay investors US$1,265,868 from future wages.
Judge Buchwald’s final judgment in the civil litigation, June 25, 2003, permanently enjoined Mr. Chabot or Chabot Investments from violating section 17(a) of the Securities Act, section 10(b) of the Securities Exchange Act, and rule 10b-5 thereunder, and sections 206(1)-(2) of the Advisers Act.