LAKE FOREST, Ill. (HedgeWorld.com)–After becoming a victim of fraud in her own right, Sharon E. Vaughn has settled with the Securities and Exchange Commission over charges that she lost control of her hedge fund investor’s assets and misled investors.

Without admitting or denying guilt, Ms. Vaughn, president and sole owner of Directors Financial Group, agreed to be barred from associating with any investment adviser, broker or dealer. DFG, manager of the Directors Performance Fund LLC, a hedge fund formed in 2002, had its investment adviser registration revoked on June 6, according to an administrative proceedings document released by the SEC this week.

At the hedge fund’s height it had raised $28 million from 29 investors.

Ms. Vaughn was allegedly defrauded by three men who promoted a risk-free investment that could yield impressive returns, according to the SEC. After investing $25 million of her fund’s assets with Richard E. Warren, David L. Myatt and Frank L. Cowles, the cash was transferred several times, tipping off regulators to what’s referred to as a “prime bank” trading scheme, according to the SEC’s original complaint.

The three men were arrested with Ms. Vaughn’s help in November 2005 and charged with wire fraud by the U.S. Attorney’s office.

Ms. Vaughn has said that all investors in the hedge fund would receive all of their money back, and the SEC ordered her and her firm to pay back all the investors’ principal . No further disgorgement or fee payments were included in the SEC settlement agreement.

The Sharon Vaughn who answered a telephone call placed to DFG would not confirm that she is the mother of the movie actor Vince Vaughn, who grew up in Lake Forest and is listed in various sources as the son of Vernon and Sharon Vaughn. That couple divorced in 1991.

SBarreto@HedgeWorld.com

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.