The day after Christmas, a hedge fund manager who made the remarkable promise that he would never lose investors’ money was accused of stealing from his clients by U.S. regulators.
But then the partial government shutdown hit and the Securities and Exchange Commission’s case went into purgatory, with all court proceedings put on hold.
In the ensuing weeks, one of the few SEC cops still on the beat put what seemed to be a reasonable request to the fund manager, Statim Holding’s Joseph Meyer.
As long as the case was stayed, would Meyer agree not to pull assets from a Statim hedge fund. Meyer refused, the regulator said in a Jan. 17 court filing. Now, SEC attorneys are seeking an injunction to bar Meyer from withdrawing funds, the filing shows.
Meyer’s lawyer, Steve Sadow, disputes that his client did anything wrong.
“Mr. Meyer and Statim Holdings Inc. will respond in detail to the SEC’s allegations,” Sadow said in an emailed statement. “But suffice it to say for now that we dispute the allegations, will vigorously contest them in court and look forward to vindication by a open-minded, fair and impartial jury.”
The Meyer enforcement action highlights that in ways both big and small, the longest-ever government shutdown is making it difficult for federal agencies to do their jobs.
At the SEC, a crucial responsibility is protecting investors from fraud. With the regulator’s staff shrinking to about 300 from more than 4,500, it’s all but stopped opening investigations.
Meyer’s eye-popping returns — in one year he said he posted a 91 percent gain — and his pledge to protect clients from losses were detailed in a July 2016 Bloomberg article.
The SEC says the profits were a fallacy. In the suit it filed against Meyer and Atlanta-based Statim last month, the agency outlined multiple allegations of misconduct, including that Meyer used investors’ cash to pay his living expenses and that he doctored financial statements to deceive clients into believing he wasn’t losing money.