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February 22, 2005 at 07:00 PM
CHICAGO (HedgeWorld.com)–In an emergency action filing, the U.S. Securities and Exchange Commission is requesting a freeze on Northshore Asset Management LLC’s assets. The commission alleges that the firm committed fraud in diverting US$37 million in two hedge funds.
The case follows reported investor complaints and the arrest of former Northshore executive Kevin O. Kelley, who will be indicted on fraud charges early next month (see )
In the criminal complaint against Mr. Kelley, an individual who wrote a US$30,000 check for investment in E-Tell alleges that just US$10,000 showed up in a statement as actually invested in the company.
And although the criminal charge, brought by the U.S. Department of Justice, stems from Mr. Kelley’s work at the Stamford, Conn.-based advisory firm Acorn Research and Management, the SEC charges are similar in pattern to allegations of Northshore investing in illiquid securities of companies and making loans to entities in which Northshore and its principals have a stake.
“This action demonstrates that the commission will act quickly to preserve the assets of defrauded investors,” said Mark K. Schonfeld, director of the SEC’s Northeast regional office.
Besides freezing the assets in two hedge funds, Ardent Research Partners LP and Ardent Research Partners Ltd., investigators also are asking the court to appoint a temporary receiver for the assets.
The case took on a new wrinkle Tuesday (Feb. 15), when Northshore Asset Management filed for Chapter 11 protection in U.S. Bankruptcy Court in Chicago, a day before the SEC filed its complaint.
