The SEC has settled charges against investment adviser Quantek Asset Management LLC, its former parent company and two managers who allegedly lied when they claimed to have put large amounts of their own money into two Latin American alternative investment funds as a way to attract investors, regulators said.
Betwen 2006 and 2008, Quantek lead executive Javier Guerra and operations director Ralph Patino misled investors considering whether to put money in Quantek's two Opportunity Funds by releasing marketing materials and side letter agreements saying that they had “skin in the game” — had invested their own money — when, in fact, they had not, the Securities and Exchange Commission said in an administrative complaint.
In addition, Quantek misled investors about the investment process of their funds and about related-party loans the funds made to Mr. Guerra and former parent company Bulltick Capital Markets Holdings LP, the complaint said.
The adviser, Bulltick, Mr. Guerra and Mr. Patino agreed to pay a total of $3.1 million in fines and disgorgement to settle the allegations. Mr. Guerra agreed to be barred from the securities industry for five years, and Mr. Patino agreed to a one-year bar.
“When making an investment decision, private-fund investors are entitled to the unvarnished truth about material information such as management's skin in the game or the adviser's handling of related-party transactions,” said Bruce Karpati, co-chief of the SEC enforcement division's asset management branch. “Quantek's investors deserved better than the misleading information they received in marketing materials, side letters and other fund documents.”
Two institutional investors put $100 million in the funds after being told executives were personally invested. The investors also secured agreements that they would be notified if Quantek principals withdrew a certain percentage of their investment in the fund, the SEC said.
A statement from Quantek and Mr. Guerra, who resigned from the funds in October 2011, said the Opportunity Funds were forced to liquidate during the financial crisis, as were other asset-backed-lending funds, and that it had helped return $260 million to investors.
“Prior to the financial crisis, my part in the stewardship of the fund helped it to generate significant returns to investors,” Mr. Guerra said. “When global markets plummeted, the overwhelming majority of inv-estors supported our liquidation plan.”
Mr. Patino “is pleased to have resolved the matter and have it put behind him,” said his attorney, Stan Wakshlag of Kenny Nachwalter PA.
Bulltick, which separated from Quantek in January 2009, said that it fully cooperated with the SEC.
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