The U.S. Securities and Exchange Commission announced fraud charges against a New York investment advisory firm and two of its executives on Wednesday, for falsifying the performance of two hedge funds they managed. One executive was also charged with misusing investors’ money, and with misleading investors about his prior legal history.
According to the SEC’s press release, distributed Wednesday, Aphelion Fund Management’s chief investment officer, Vineet Kalucha, allegedly changed an external audit report for an investment account he managed, to show a positive return, rather than a negative.
The firm’s chief financial officer, George Palathinkal, allegedly knew about his partner’s lie, but allowed the false account to be distributed to prospective investors, the SEC said.
The two men also allegedly overstated the total amount of the assets under management by some $10 million, when in reality the amount was never more than $5 million, the SEC said.
Kalucha was also charged with allegedly using investors’ money to make payments on his BMW, and to settle some separate personal legal matters, the SEC said.
The SEC obtained an asset freeze for investors in the accounts. The SEC is seeking that Kalucha and Palathinkal be barred from the investment industry, and disgorgement of ill-gotten gains.
“We allege that on multiple occasions, Aphelion, Kalucha, and Palathinkal intentionally overstated the success of their investment strategy,” Robert Burson, associate director of the SEC’s Chicago Regional Office, said in a press release. “Kalucha also has been using investor money as his own, and emergency action was necessary to protect the interests of investors.”
A hearing on the SEC’s motion for a preliminary injunction has been scheduled for May 15 before U.S. District Court Judge Richard Berman of the Southern District of New York, the SEC noted.
Contacted at his home in Washington, D.C., by Bloomberg BusinessWeek, Kalucha declined to comment on the complaint.
