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February 19, 2015 at 11:42 AM
The Financial Industry Regulatory Authority censured and fined a broker-dealer for failing to conduct sufficient due diligence regarding private placement offerings that it recommended to accredited investors.
Also, among its recent enforcement actions, the Securities and Exchange Commission charged a so-called hedge fund manager with stealing investor funds, shut down a pyramid scheme by two Colorado operators, and charged a brokerage firm and its CEO with fraud in CDO liquidation auctions.
SEC: Fake Hedge Fund Manager Bilked Investors to Go to Harvard, Find His Match
The SEC has charged Moazzam “Mark” Malik, the manager of a bogus hedge fund most recently called Wolf Hedge LLC with stealing the money he raised from investors. He then used it for his own purposes, including Harvard classes and membership in a matchmaking site, and even faked his death to at least one investor.
According to the agency, Malik claimed that he operated a hedge fund with approximately $100 million in assets under management. He promised would-be investors consistently high returns to lure them in.
While he raised $840,774 from investors, the so-called fund never made real investments and never held more than $90,177 in assets; instead, Malik continually pulled out the cash and spent it as his own on such expenses as dining out, jewelry, luxury travel and even continuing education classes at Harvard and membership in a matchmaking website.
Despite repeated demands from investors for the return of their money, Malik has flatly refused or delayed most of their redemption requests. He allegedly went so far as to create a fictitious fund employee who sent one investor an email claiming that Malik had died.
Despite investor redemption requests, Malik has continued to solicit investors, and has also changed the name of the so-called fund several times since he created it in 2010. He first called it Wall Street Creative Partners, then changed it to Seven Sages Capital LP, then to American Bridge Investment Group LLC, before renaming it Wolf Hedge LLC. He has described the fund as “a privately held Global Investment Management firm dedicated to the individuals and institutions around the world.”
He has also created a fictitious “Amanda Ebert” who was identified with a title of “Investor Relations, Wolf Hedge LLC” in email communications with several investors. Those e-mails included a photograph, supposedly of the nonexistent Ebert, that Malik pulled from the Internet — of a real woman who is not Amanda Ebert, does not know Malik and never gave him authorization to use her image in the emails.
The SEC is seeking a temporary restraining order to freeze the assets of Malik and his fund, as well as a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest and penalties. Its investigation is continuing.
SEC Shuts Down Colorado Pyramid Scheme Boasting ’3-D Matrix’
The SEC has charged two operators of a pyramid and Ponzi scheme based in Colorado with fraud, and has also obtained an emergency asset freeze against them.
According to the agency, Kristine Johnson of Aurora, Colorado, and Troy Barnes of Riverview, Michigan, have raised more than $3.8 million since April 2014 from investors they enticed into buying positions in their company Work With Troy Barnes Inc., which is doing business as “The Achieve Community.”
The pitch, made via Internet videos and other Web promotions promised extraordinary returns of 700% through a purported “triple algorithm” and “3-D matrix.” According to the pitch, “you and anyone you know can make as much money as you want” by purchasing positions that cost $50 each. As “investors” progressed through the matrix of the scheme, the promotion claimed that they would receive a $400 payout on each position within three to six months.
Barnes claimed to have hired a seasoned programmer to perfect the triple algorithm investment formula supposedly generating the extraordinary returns. But there was no programmer, and earlier investors have only been paid with the money sent in by later investors.
