According to the Securities and Exchange Commission website, a Greenwich, Conn.-based investment advisory firm and its two owners were recently charged with fraudulently inflating the prices of securities in hedge fund portfolios they managed.
The SEC claims that the investigation found that AlphaBridge Capital Management allegeldy “told investors and its auditor that it obtained independent price quotes from broker-dealers for certain unlisted, thinly-traded residential mortgage-backed securities.” The report claims that AlphaBridge instead “gave internally-derived valuations to broker-dealer representatives to pass off as their own. The inflated valuation of these assets caused the funds to pay higher management and performance fees to AlphaBridge.”
AlphaBridge has reportedly agreed to pay $5 million combined to settle the charges.
Richard L. Evans has been separately charged by the SEC with “assisting in the pricing scheme while working as a broker-dealer representative.” Evans agreed to pay a $15,000 penalty. He cooperated with the SEC’s investigation and has been barred from working in the securities industry for at least one year to settle charges that “he aided and abetted and caused violations by AlphaBridge”. Evans neither admitted nor denied the findings.
The SEC reported that according to its orders instituting settled administrative proceedings, AlphaBridge also allegedly misled the funds’ auditor during two year-end audits by suggesting that Evans independently generated data to support AlphaBridge’s prices.
AlphaBridge has consented to the entry of the SEC’s order without admitting or denying the findings. AlphaBridge has agreed to pay nearly $1 million in penalties to compensate for the funds’ over payment of management and performance fees. It has also agreed to return more than $4 million in disgorgement, the firm will then close down the funds.
Investors in these hedge funds may have suffered losses due to these advisors errors. If these hedge funds were bought from a FINRA registered broker, investors may have legal recourse.
The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For a free consultation with a securities attorney, please call the firm’s Chicago office at 312/238-9650.
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