SEC charges hedge fund managers with abusing client assets

New York SEC director says two managers “violated the most fundamental duties of an investment adviser"

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The US Securities and Exchange Commission (SEC) has announced it has charged two hedge fund managers at Juno Mother Earth Asset Management with abusing client assets.

According to the SEC, Eugenio Verzili and Arturo Rodriguez allegedly misappropriated client assets, inflated assets under management, to a total of $1.8 million, and filed false information with the US regulator.

It is alleged the pair used the funds to pay Juno’s operating costs, including “payroll, rent, travel, meals and entertainment”.

They also concealed the misappropriation by issuing false promisory notes, the SEC says. Verzili and Rodriguez worked to disguise the level of investment some Juno partners had made into one of its funds, the regulator alleges, “claiming they had invested millions of dollars when they actually had invested nothing in the funds”.

The SEC’s complaint further claims Juno, Verzili and Rodriguez marketed investments in a Juno fund, but failed to fully disclose Juno’s financial condition to investors. They also failed to disclose that Juno owed a client fund a minimum of $1.2 million. “While offering and selling securities in the client fund, Juno repeatedly inflated and misrepresented the amount of assets Juno managed and claimed at one point that Juno had as much as $200 million under management,” says the SEC.

In a statement, George Canellos, director of the SEC’s New York regional office, said the pair and the firm “violated the most fundamental duties of an investment adviser by lying to clients and misappropriating the money entrusted to their care”.

Following an investigation in collaboration with the Cayman Islands Monetary Authority and the Financial Markets Authority Lichtenstein, the SEC is seeking permanent injunctions, disgorgement of ill-gotten gains plus interest, and penalties.

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