Litigation: SEC charges hedge fund portfolio manager with fraud
Targeted News Service
The Securities and Exchange Commission today charged the portfolio manager of an Oklahoma City hedge fund with defrauding the fund and its investors by making undisclosed trades that caused the fund to suffer a complete loss of investor capital totaling more than $10 million.
According to the SEC's Complaint, from at least November 2016 through February 2018, Lee A. Bressler served as portfolio manager for the Carbon Master Fund, L.P. The SEC alleges that Bressler represented to investors that the fund followed a conservative investment strategy emphasizing capital preservation and low risk. The SEC further alleges, however, that while making these misrepresentations, Bressler engaged in unauthorized high-risk trading in two undisclosed accounts that were margined against the fund's assets. As alleged, this trading not only violated the fund's stated investment mandate but also exposed the fund's assets to extreme risk of loss, which came to fruition in February 2018. According to the SEC, Bressler's unauthorized trading caused the complete loss of investor capital in the fund.
The SEC's Complaint, filed in U.S. District Court for the Southern District of New York, charges Bressler with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the SEC's allegations, Bressler has agreed to be permanently enjoined from violating these provisions, to be barred from serving as an officer or director of a public company, and to pay a civil penalty of $184,000. The settlement is subject to court approval.
The SEC's investigation was conducted by Kathleen Galloway and supervised by Sarah S. Mallett, Barbara Gunn, and Eric R. Werner of the SEC's Fort Worth Regional Office. David B. Reece will lead the litigation, under the supervision of B. David Fraser. The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of New York.