SAN FRANCISCO (HedgeWorld.com)–The Securities and Exchange Commission is alleging a hedge fund concealed trading losses and provided false statements to investors.
In an administrative order filed March 30, the regulator accuses managers of Cogent Capital Management LLC of hiding a 20% decline in the $30 million hedge fund’s value through the creation of a “redemption reserve” account that only existed on paper. Officials are asking for cease-and-desist proceedings against the San Francisco hedge fund firm and its owners.
The reserve account totaled $228,000, but was never really used other than to pad investment returns, SEC officials said in a complaint. It was referred to in year-end accounting statements, but the SEC said investors were never told that it was used to increase Cogent’s investment performance figures and hid 90% of the fund’s losses.
The manager of the hedge fund from January through to July 2003 was Global Crown Capital LLC, which was formed in 2001. The firm was registered as a broker dealer and as an investment adviser with the commission on April 28, 2003.
J&C Global Securities Investments LLC managed the Cogent hedge fund from July 2003 to the present and is not registered with the commission or any state securities regulator, according to the administrative court order.