Bahamas-based fund adviser, firms agree to multimillion-dollar SEC settlement over fund misrepresentations

A Bahamas-based fund adviser firm and its founder have agreed to pay nearly $10 million in monetary relief to settle allegations from the Securities and Exchange Commission that they breached fiduciary duties and misled investors in multiple private funds.

Tomislav “Tom” Vukota, who previously lived in Colorado, along with his firms Vukota Capital Management and VCM Global Asset Management, reached the settlement without admitting or denying the SEC’s findings.

Vukota Capital Management, VCM for short, is a New York limited liability company and unregistered investment adviser. From at least 2017, the firm has been offering investments in alternative investments. VCM Global Asset Management, meanwhile, is a Bahamian International Business Company that began reporting with the SEC as an exempt reporting adviser in December 2022.

In a statement published Tuesday, the SEC said Vukota and his firms engaged in a series of negligent acts that included improper loans, misleading buyout offers, and false statements in fund marketing materials.

According to a complaint filed by the SEC in federal court in Colorado, Vukota and VCM caused private funds they advised to make short-term loans to VCM at below-market rates, often to cover cash shortfalls at other funds.

These loans, which were taken out from at least 2017 through May 2022, were not disclosed to investors and were prohibited by the funds’ partnership agreements.

“Vukota and VCM caused various private funds they advised to make short-term loans to VCM at below-market rates to, among other things, cover cash shortfalls at other private funds,” the SEC said in its statement.

At least seven different private funds were making loans to VCM as of 2017, according to the SEC complaint.

The SEC complaint further said that Vukota set the interest rates that the private funds paid to VCM. In 2017, the private funds paid no interest on the loans; they paid an annual rate of 5% in 2018, and 3% from 2019 to 2022.

The multi-year scheme of short-term lending led to Vukota and VCM receiving almost $1.3 million in ill-gotten gains, according to the complaint.

The SEC also said that in Vukota and VCM sent letters to investors in four private funds as part of an effort to buy out their interests. The letters failed to disclose Vukota’s conflicts of interest as the intended buyer and did not obtain investor consent for those conflicts.

The SEC said the buyout offers “were misleading and failed to disclose conflicts of interest,” resulting in investors selling their interests at prices that did not reflect the true value of the underlying properties.

In a third allegation, the SEC said that from 2017 through 2023, Vukota and VCM Global Asset Management made material misstatements in marketing and offering materials for the Vukota Multi-Strategy Fund.

These included inflating the fund’s assets under management, falsely claiming the fund was audited, and misstating its investment strategy.

“The [marketing materials] stated that VMSF had an auditor and provided the specific name of the auditing firm,” as per the regulator. In reality, no audit had been conducted for several years, with the last audit of VMSF having been conducted for the period ending in December 31, 2014.

Without admitting or denying the allegations, Vukota and his firms consented to injunctions and agreed to pay $6,943,212 in disgorgement, $1,766,582 in prejudgment interest, and a $1,000,000 penalty, subject to court approval.