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April 21, 2017 at 06:52 AM
The Securities and Exchange Commission charged a New York-based investment advisor, Hyaline Capital Management, LLC, and one of its founders, Justin D. Meadlin, with disseminating false information to prospective investors and clients in order to induce them to invest money with them.
The SEC’s complaint, filed in federal court in New York, alleges that beginning in September 2012 and continuing through April 2013, Meadlin disseminated dozens of emails to prospective investors and clients in which he inflated Hyaline’s assets under management. Meadlin claimed that Hyaline managed between $17 million and $25 million when it managed no more than $5.5 million during that time, according to the SEC.
(Related: 12 Worst Financial Advisors in America: 2016)
The complaint also alleges that beginning in January 2013 and continuing to at least June 2014, Meadlin began touting a purported “quantitative” trading strategy and a fictitious Hyaline Capital Quantitative Fund (HCQF) in email solicitations to more than two dozen prospective investors and in subscription hedge fund databases.
Meadlin allegedly claimed that HCQF had as much as $25 million in assets, and claimed historical performance returns dating back to 2009 that were purportedly from a proprietary algorithm, when, in fact, HCQF never existed. According to the SEC, neither Meadlin nor Hyaline had acquired a proprietary algorithm; and the stated performance returns were based almost entirely on paper trades without real capital and exaggerated by approximately 20%.
The SEC says that before July 2013, Meadlin and Hyaline managed no assets in any quantitative strategy at all, and even after July 2013, they never managed more than $3.3 million in AUM in the strategy.
The SEC’s complaint further alleges that Meadlin and Hyaline fraudulently induced investments from at least two clients using the false performance and AUM data.
The SEC’s complaint charges Meadlin and Hyaline with violations of the anti-fraud provisions of the securities laws and seeks injunctive relief, disgorgement and penalties against Meadlin and Hyaline.
SEC Obtains Asset Freeze in Fraudulent Real Estate Investment Scheme
The SEC announced charges against two Fort Worth residents and their company for defrauding investors in a commercial real estate investment scheme. At the SEC’s request, U.S. District Judge Terry R. Means has entered an asset freeze and appointed a receiver over the company.
The SEC’s complaint, filed on April 13, 2017 in Fort Worth federal court, alleges that, since early 2014, Mantford C. Hawkins and David E. Bell – the CEO and COO, respectively, of 4D Circle LLC – raised at least $9 million from 50 investors in seven states and Canada.
The complaint alleges that 4D Circle purported to be “a wealth creation company” focused on acquiring apartment and office buildings, to which it would then apply supposedly proprietary technology and managerial practices to generate “greater profitability [with] less risk for our investors.”
The company’s website and written offering materials allegedly elaborated on these claims, asserting for instance that investors could earn returns of 30% within a 9-month time frame; investments were “bonded”; and investor funds were protected through the use of escrow accounts and third-party oversight. The offering materials also allegedly included “case studies” of particular properties the company had acquired, which purported to demonstrate the profitability of its model.
But, according to the SEC’s complaint, these representations and case studies were false.
SEC Charges Oil & Gas Promoter With Misappropriating Funds
The SEC charged Matthew W. Fox of Plano, Texas and his company, Wayne Energy, LLC, with securities fraud arising from a failed offering of interests in a joint venture formed to rework and recomplete an oil and gas well in Upshur County, Texas.
The SEC’s complaint, filed in federal district court in Sherman, Texas, alleges that Fox raised approximately $950,000 for this joint venture between March 2015 and October 2016. The complaint alleges that Fox had previously operated another oil and gas company – Frisco Exploration Company – but formed Wayne Energy in March 2015, after Frisco Exploration failed. Wayne Energy was to be the manager of the joint venture.
