SEC charges Belesis, hedge fund manager with fraud

Troubles mount for beleagured B-D owner as Commission files charges; Finra in the wings

The Securities and Exchange Commission has charged Anastasios “Tommy” Belesis, owner of independent broker-dealer John Thomas Financial Inc., and a Houston-based hedge fund manager with defrauding investors.

The regulator said last Friday it found that hedge fund manager George R. Jarkesy Jr. worked closely with Mr. Belesis to launch two hedge funds that raised $30 million from investors, and that as part of the scheme, Mr. Jarkesy led investors to believe that he was solely responsible for investment decisions.

Instead, in some cases, Mr. Belesis directed some investments from the hedge funds into a company in which his firm was invested, according to a statement from the SEC. In addition, Mr. Belesis “bullied Jarkesy into showering excessive fees on John Thomas Financial, even in instances where the firm had done virtually nothing to earn them,” the SEC said.

The two funds, formerly known as the John Thomas Bridge and Opportunity Fund LP I and John Thomas Bridge and Opportunity Fund LP II, invested in bridge loans to startup companies, equity investments — chiefly in microcap companies — and life settlement policies.

The funds were ostensibly independent from John Thomas Financial. The SEC charged that Mr. Jarkesy inflated the valuation of the funds, increasing the fees he collected. He then diverted the money to John Thomas Financial and Mr. Belesis.

The SEC charged Mr. Jarkesy with violating his firm’s fiduciary duty to its investors by catering to Mr. Belesis.

“We will never retreat, we will never surrender and we will always try to get you as much [fees] as possible, Everytime [sic] without exception!” Mr. Jarkesy wrote in a 2009 e-mail to Mr. Belesis, according to the SEC’s complaint.

Andrew M. Calamari, director of the SEC’s New York regional office, said in a statement: “Jarkesy disregarded the basic standards to which all fund managers are held. Not only did he falsify valuations and deceive investors about the value of their holdings, but he bent over backwards to enrich Belesis at the funds’ expense. Belesis, in turn, exploited the supposed independence of the funds to surreptitiously pull the strings on key decisions.”

Mr. Belesis also strong-armed Mr. Jarkesy into letting him make investment decisions for the funds, according to the SEC.

“As leverage, Belesis conveyed to Jarkesy — often in a profane and belligerent manner — that the millions of dollars invested into the funds by JTF customers required Jarkesy to follow Belesis’ instructions,” the SEC stated in its order. “Overall, Jarkesy’s allegiance to Belesis and JTF cost the funds significant sums of money, directly or indirectly, for placement fees, loans to small companies that then used the money to pay fees to JTF, and for unearned bridge loan fees JTF received for doing no work.”

In an e-mail, Mr. Jarkesy’s attorney, Jason S. Lewis, a partner at Locke Lord LLP, wrote that his client “vehemently denies the SEC’s allegations and intends to mount a vigorous defense.”

Mr. Belesis’ lawyer, Ira Lee Sorkin, a partner at Lowenstein Sandler LLP, said that his client also will fight back.

“Our client’s side will be brought out in our defense of the case,” Mr. Sorkin said.

“Mr. Belesis intends to defend himself vigorously against these allegations,” said David Pitts, a spokesman for the firm.

Last month, the Financial Industry Regulatory Authority Inc. sent Mr. Belesis a Wells notice, signifying that it might commence disciplinary proceedings for his role in an alleged pump-and-dump stock scheme. This month, Finra accused him of trying to intimidate brokers who left the firm.

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