SEC freezes adviser's assets over alleged $39 million fraud

SEC freezes adviser's assets over alleged $39 million fraud
The investment adviser sold unregistered securities to at least 30 investors, according to the complaint
MAR 11, 2020

The Securities and Exchange Commission has obtained an asset freeze against a Sarasota, Fla.-based investment adviser, Kinetic Investment Group, and its managing member, Michael Scott Williams, in connection with an alleged fraud.

Mr. Williams and his firm sold unregistered securities, raising approximately $39 million from at least 30 investors located mostly in Florida and Puerto Rico for their purported hedge fund, Kinetics Funds, according to the complaint filed in the U.S. District Court for the Middle District of Florida.

The SEC alleges Mr. Williams and the firm made material misrepresentations to investors, saying that Kinetic Funds’ largest sub-fund invested solely in U.S.-listed financial products and that at least 90% of its portfolio was hedged using listed options. Mr. Williams actually invested a significant part of the sub-fund’s assets in a private start-up company he owned, and misappropriated at least $6.3 million through undisclosed loans to himself and his entities, according to the complaint.

A federal granted the SEC’s request for emergency relief, including an asset freeze and an order for records preservation, against Kinetic Group, Mr. Williams and a number of companies charged by the SEC as relief defendants. The court also granted the SEC’s request to appoint a receiver for the firm.

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