In a busy day for fraud investigators at the SEC, on Monday the Commission announced a settlement with a Boston-based father and son who the SEC said misled investors about the investment strategies and past performance of their funds.
Gabriel and Marco Bitran raised up to $500 million for eight hedge funds and managed accounts over three years for their companies, GMB Capital Management LLC (now known as Clearstream Investments LLC) and GMB Capital Partners LLC. In marketing the funds, the SEC said GMB and the Bitrans created performance figures for the funds and told investors those figures were based on “actual trading with real money.” However, the SEC said the Bitrans “knew their representations were false and the track records were based on hypothetical historical investments.”
For example, the settlement says that company’s marketing materials for one of the hedge funds using a “Global Alpha” strategy described the hedge fund’s pre-inception returns as “actual performance” in “managed accounts.” However, the settlement reads that the Global Alpha pre-inception track records “were not based on actual trades but were back-tested hypothetical simulations” and that GMB Management and the two men “knew that their representations regarding the pre-inception performance were false.”
In addition, the SEC said the Bitrans provided false information to SEC examiners at an unannounced examination.
In the words of David Bergers, director of the SEC’s Boston regional office, “The Bitrans solicited investors by touting an impressive track record and a unique investment strategy, and they lied about both.”