SEC Charges Hedge Fund Adviser Randall Hansen with Fraud

Posted on March 4, 2013 by BraunHagey & Borden

SEC v. Randal Kent Hansen, et al., Case No. 13-cv-01403 (S.D.N.Y.).  On March 4, 2013, the SEC announced fraud charges related to two hedge funds — RAHFCO Funds LP and RAHFCO Growth Fund LP (the “RAHFCO Hedge Funds”).  The SEC charged RAHFCO Management Group, LLC (“RAHFCO Management”), the general partner of RAHFCO Hedge Funds; its principal, Randal Kent Hansen; Hudson Capital Partners Corporation (“HCP”), the portfolio manager of RAHFCO Hedge Funds; and Vincent Puma, the principal of HCP, with securities fraud for their alleged involvement in a fraudulent scheme that raised more than $10 million.  Continue reading →

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SEC Charges Falcon Ridge Development and its CEO Fred Montano with Fraud in Market Manipulation Scheme

Posted on March 4, 2013 by BraunHagey & Borden

SEC v. Falcon Ridge Development, Inc., et al., Case No. 13-cv-1101 (E.D. Pa.).  On March 1, 2013, the SEC announced fraud charges against Falcon Ridge Development, Inc. (“Falcon Ridge”) and its President and CEO, Fred M. Montano.  The SEC alleges that Montano arranged with an individual (the “Cooperator”), whom Montano thought had connections to corrupt brokers, to generate purchases of the company’s stock in exchange for cash kickbacks.  In reality, the Cooperator was secretly cooperating with the FBI.  According to the SEC, Montano paid $1,000 to orchestrate a purchase of 625,000 shares of Falcon Ridge common stock by the Cooperator.  Montano also shared inside information and a confidential shareholder list with the Cooperator, and coordinated the release of news with the illegal purchases in the stock.  Through these activities, Montano generated artificial trading activity that created a false impression of supply and demand for Falcon Ridge’s stock.  The SEC charged Falcon Ridge and Montano with violating Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  The SEC seeks injunctive relief, disgorgement and prejudgment interest, and civil monetary penalties, and penny stock and officer and director bars against Montano.
Montano was also charged criminally by the U.S. Attorney’s Office.

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SEC Charges San Francisco-Bay Area Real Estate Fund Managers Walter Ng, Kelly Ng and Bruce Horwitz with Fraud

Posted on March 4, 2013 by BraunHagey & Borden

SEC v. Walter Ng, Kelly Ng, Bruce Horwitz, and The Mortgage Fund, LLC, Case No. C 13-0895 NC (N.D. Cal.).  On February 28, 2013, the SEC announced fraud charges against Bay Area real estate fund managers Walter Ng, his son Kelly Ng, and Bruce Horwitz with fraud in connection with their real estate fund, Mortgage Fund ‘08 LLC (“MF08”).  They raised more than $85 million during an 18-month period.  The SEC alleges that the Ngs and Horwitz touted the MF08 fund during the 2008 financial crisis as an opportunity for conservative investments underwritten by commercial real estate loans secured by deeds of trust.  Continue reading →

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SEC Charges Chinese Company Keyuan Petrochemicals with Fraud

Posted on March 4, 2013 by BraunHagey & Borden

SEC v. Keyuan Petrochemicals, Inc. and Aichun Li, Case No. 1:13-cv-00263 (D.D.C.).  On February 28, 2013, the SEC announced fraud charges against Keyuan Petrochemicals, Inc., a Chinese issuer formed through a reverse merger in April 2010.  The SEC also charged the Company’s former CFO, Aichun Li, with aiding and abetting Keyuan’s books and records and internal controls violations.  The SEC alleged that Keyuan routinely did not disclose in its SEC filings several related party transactions, as required by Generally Accepted Accounting Principles .  The related parties included the company’s founding and controlling shareholders and its current CEO, among others.  Continue reading →

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SEC Charges Hedge Fund Managers David Bryson and Bart Gutekunst with Fraud

Posted on February 27, 2013 by BraunHagey & Borden

SEC v. New Stream Capital, LLC, New Stream Capital (Cayman), Ltd., David A. Bryson, Bart C. Gutekunst, Richard Pereira, and Tara Bryson, et al., Case No. 3:13-cv-00264 (D. Conn.).  On February 26, 2013, the SEC announced fraud charges against hedge fund managers David Bryson and Bart Gutekunst and their advisory firm, New Stream Capital, LLC, (“New Stream”) for lying to investors about the capital structure and financial condition of their hedge fund.  New Stream was an unregistered investment adviser that managed a $750 million hedge fund.  The SEC also charged New Stream Capital (Cayman), Ltd. (“Cayman Adviser”), an adviser entity affiliated with New Stream, Richard Pereira (“Pereira”), New Stream’s former CFO, and Tara Bryson, New Stream’s former head of investor relations.  Tara Bryson settled with the SEC. Continue reading →

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SEC Sues Fund Manager George Price in Scheme Involving Risky Mortgage-Related Investments

Posted on February 25, 2013 by BraunHagey & Borden

SEC v. ABS Manager, LLC, et al., Case No. 13 CV 0319 PC JMA (S.D. Cal.).  On February 20, 2013, the SEC announced fraud charges against George Charles Cody Price.  Price raised $18 million for three investment funds through his firm ABS Manager LLC.  According to the SEC, Price told investors that their money was safe because it was backed by government-backed bonds that would generate as much as 18 percent per year in profits.  In reality, however, Price invested the money in risky collateralized mortgage obligations (“CMOs”).  Continue reading →

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SEC Obtains Emergency Asset Freeze of Account Used in Insider Trading Ahead of Heinz Acquisition

Posted on February 15, 2013 by BraunHagey & Borden

SEC v. Certain Unknown Traders in the Securities of H.J Heinz Company (S.D.N.Y.).  On February 15, 2013, the SEC announced that it obtained an emergency court order to freeze assets in a Zurich, Switzerland-based trading account that was used to obtain more than $1.7 million from trading in advance of the February 14, 2013 public announcement about the acquisition of H.J. Heinz Company.  According to the SEC, before any public information was available that Berkshire Hathaway and 3G Capital had agreed to buy H.J. Heinz Company in a $28 billion deal, unknown traders bought call options the day before the public announcement.  Continue reading →

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SEC Sues Investment Advisor Desla U. Thomas in Investment Scheme

Posted on February 15, 2013 by BraunHagey & Borden

SEC v. Desla U. Thomas, et al., Case No. 3:13-cv-00739-L (N.D. Tex.).  On February 15, 2013, the SEC announced fraud charges against investment adviser Delsa U. Thomas, The D. Christopher Capital Group, LLC (“DCCMG”), and The Solomon Fund LP.  The SEC’s complaint alleges that Thomas guaranteed that $1 million in investor money would be safely invested in U.S. Treasury securities and would generate more than 600 percent in profits within 35 banking days.  Although Thomas purchased U.S. Treasury securities, she got additional money by margining the securities and then commingled the proceeds with investor funds.  Thomas did not disclose any of this.  In addition, Thomas used newer investor money to make Ponzi payments to earlier investors and also used investor money to cover personal expenses.  Continue reading →

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SEC Obtains Final Judgments in Insider Trading Scheme Involving Wall Street Banker, Russian Trader and His Wife

Posted on February 14, 2013 by BraunHagey & Borden

SEC v. Igor Poteroba, Aleksey Koval, Alexander Vorobiev, and Relief Defendants Tatiana Vorobieva and Anjali Walter, Case No. 1:10-CV-2667 (AKH) (S.D.N.Y.).  On February 13, 2013, the SEC announced it had obtained default judgments against Alexander Vorobiev (“Vorobiev”) and his wife, relief defendant Tatiana Vorobieva (“Vorobieva”) (collectively, the “Vorobievs”), for their role in an insider trading scheme to trade ahead of health care-related acquisitions, tender offers, and other corporate transactions.  The SEC also announced that it obtained a final judgment against Igor Poteroba (“Poteroba”), formerly an investment banker with UBS Securities LLC (“UBS”), who also had been charged with insider trading.  Continue reading →

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SEC Settles Cherry-Picking Case against Hedge Fund Manager Howard Berger

Posted on February 13, 2013 by BraunHagey & Borden

SEC v. Howard Brett Berger and Michelle Berger, Case No. CV-12-4728 (E.D.N.Y.).  On February 12, 2013, the SEC announced it settled an enforcement action brought in September 2012.  The SEC alleged Howard Berger (“Berger”) was a founder and manager of Professional Traders Management, LLC and Professional Offshore Traders Management, LLC, which managed and acted as investment advisers for hedge funds Professional Traders Fund, LLC (“PTF”) and Professional Offshore Opportunity Fund (“POOF”).  Berger was involved in fraudulently “cherry-picking” trade allocations, meaning he cherry picked profitable trades from PTF and allocated those trades to his wife’s brokerage account.  Continue reading →

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