InfoBytes Blog
SEC charges alleged hedge fund with defrauding $1.2 million from investors
On February 2, the SEC issued a complaint which charged a company for allegedly raising $1.2 million from 15 investors through an offer and sale of fraudulent securities for a hedge fund. The company raised this money from 2017-2018 and offered securities that would be used to form a hedge fund and invest in crypto-assets using “specific” investment strategies. (The company ostensibly managed the hedge fund, but the hedge fund never appeared to be created.)
The company made several misrepresentations which the SEC claimed violated Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. These alleged misrepresentations included the founder’s background and education, the demand for and size of the proposed hedge fund, and the investment scheme to grow a return for investors. The investors were given an investor pitch deck that put forth the hedge fund’s terms, investment strategy, and management team. Then, the investors gave a minimum investment of $1 million; however, the hedge fund investors were offered the opportunity to invest for less than $1 million through a separate entity.
Through this, the SEC alleged that the company violated the federal securities law and put forth two claims for relief. The SEC permanently enjoins the company from issuing, buying, offering, or selling any security, including crypto-assets. No civil monetary judgment has been offered.