Earlier this week, the SEC confirmed that $230 million in holdings of a hedge fund's offshore account are back in the United States. Overall, enforcement actions are said by the SEC to have returned over $2 billion to investors last year. The underlying case charges an individual, his investment advisory firm and a hedge fund management entity that managed three hedge funds with involvement in a Ponzi scheme.
The SEC advised the US District Court for the District of Connecticut that the funds are in a bank account in this country and in accord with the court's prior rulings, will remain frozen as the case proceeds. Judge Janet Bond Arterton had entered an order earlier this month that froze the hedge funds' assets and ordered them returned to the United States. She had already frozen the assets of other defendants.
Notably, Ethiopis Tafara, the Director of the SEC's Office of International Affairs was quoted in the SEC's press release saying, " 'In this case, the ability to freeze and repatriate the alleged financial crime proceeds was critical to the SEC's effective enforcement of the U.S. securities laws.' "
The SEC's action alleges that the individual defendant and his unregistered investment advisory firm "misappropriated at least $53 million in investor funds and used the money for self-dealing transactions." Specifically, it is alleged that he improperly transferred investors' monies over which he had personal control and then invested the monies for his personal benefit and that of entities over which he had control "running a multi-year, multi-million dollar Ponzi scheme."
An additional investment advising entity, hedge funds they managed and affiliated entities were recently named in the litigation in a second amended complaint "as relief defendants for allegedly holding funds tainted by the Ponzi scheme."
The charges against various defendants include alleged violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
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