Hedge fund charged with running Ponzi scheme

The SEC today charged an unregistered hedge fund with operating a large-scale scheme that it said defrauded hundreds of investors millions of dollars.
DEC 07, 2009
By  Bloomberg
The Securities and Exchange Commission today charged an unregistered hedge fund with operating a large-scale scheme that it said defrauded hundreds of investors millions of dollars by overstating investment returns and misrepresenting the value of assets under management. The SEC said it is seeking a court order to freeze the assets of Westgate Capital Management LLC of Pearl River, N.Y., and its managing member, James Nicholson of Saddle River, N.J. He is a former registered representative who was permanently barred in 2001 by NASD, now the Financial Industry Regulatory Authority Inc. of New York and Washington, the SEC said. Investors were solicited by the firm “with false claims of an almost unbroken eight-year string of monthly investment successes,” the SEC said in a release. The U.S. Attorney’s Office in New York also announced parallel criminal charges against Mr. Nicholson today, the SEC said. He and Westgate defrauded investors in 11 unregistered hedge funds that they managed by misrepresenting the value of the hedge funds to investors and soliciting new investors with sales materials that claimed a “nearly impossible record of investment success,” the SEC said. At least one Westgate fund claimed positive returns in 98 of 99 consecutive months, the SEC said. By late last year, the funds had sustained such losses that redemption requests could no longer be honored, the SEC said. Mr. Nicholson created a fictitious accounting firm under the name of an actual accountant and provided investors with bogus audited financial statements, the SEC said. In a statement that brought to mind the Ponzi scheme alleged against Bernard L. Madoff Securities LLC of New York, Scott Friestad, deputy director of the SEC’s Division of Enforcement, said in the release: “If it seems too good to be true, it probably is.”

Latest News

RIA moves: The Mather Group, Brand Asset Management announce deals
RIA moves: The Mather Group, Brand Asset Management announce deals

Consolidation continues in US wealth management industry.

US broker-dealer fintech aims for global footprint as it acquires international firm
US broker-dealer fintech aims for global footprint as it acquires international firm

Tech company democratizes access to US trading infrastructure.

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.