SEC Charges Hedge Fund Manager
On April 4, 2014, the Securities and Exchange Commission filed suit in United States District Court in Dallas, Texas, alleging that, from October 2009 to June 2012, Matthew D. Sample of San Diego, California used his hedge fund to raise almost $1 million from five investors based on representations that he would use their money to trade on the investors’ behalf. Instead, the SEC alleges that he fraudulently diverted approximately one-third of the money for his personal use and to make payments to other investors.
The SEC’s complaint alleges that Sample raised the money from investors based in New Mexico and elsewhere through his hedge fund, The Lobo Volatility Fund, LLC. Sample told investors he would take a monthly management fee of 1/12 of 1% of Lobo’s net asset value, 20% of trading profits and only limited expenses. But almost immediately after receiving investor funds, Sample diverted significant sums to his personal accounts, credit card payments, retail purchases, meals, and entertainment. The complaint further alleges that when Sample’s trading strategy failed, resulting in the loss of all remaining investor funds, he provided investors with false documents making it look like his trading had been successful. He also used at least $50,000 from a new investor to make a partial payment to an investing couple who had demanded a refund.
The Commission charges Sample with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940. Without admitting or denying the allegations in the complaint, Sample has consented to permanent injunctions against violations of these provisions and from directly or indirectly soliciting or accepting funds from any person or entity for any unregistered offering of securities. The Commission has asked the district court to order Sample to pay disgorgement of ill-gotten gains with prejudgment interest and to impose civil penalties.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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