Hedge fund firm owners agree to $5 million combined settlement
On June 1, 2015 the Securities and Exchange Commission charged Greenwich, Connecticut-based AlphaBridge Capital Management and its two owners with fraudulently inflating the prices of securities in funds they managed. These inflated valuations caused the funds to pay higher management and performance fees to AlphaBridge.
According to the SEC news release, AlphaBridge Capital Management and its owners – Thomas T. Kutzen and Michael J. Carino – “told investors and its auditor that it obtained independent price quotes from broker-dealers for certain unlisted, thinly-traded residential mortgage-backed securities.” In fact, what the firm did was give “internally-derived valuations to broker-dealers to pass off as their own.”
For pricing their portfolio based upon their own independent view of market conditions, the firm and Kutzen and Carino have now agreed to pay $5 million combined to settle the charges.
In addition to Kutzen and Carino, the SEC also charged Richard L. Evans based in Houston, Texas for helping the firm with its pricing scheme. Evans worked as a broker-dealer representative and purportedly, according to AlphaBridge, independently generated data backing up AlphaBridge’s pricing. According to the SEC investigation, however, it was Carino himself that developed the data. By suggesting that Evans generated the data, the firm and its owners misled the fund’s auditors for two years.
Evans, without admitting or denying the findings, cooperated with the SEC, agreed to pay a $15,000 penalty and is barred from working in the securities industry for at least one year.
As for AlphaBridge and Kutzen and Carino, the SEC order found that AlphaBridge violated the antifraud and other provisions of the Investment Advisors Act of 1940, while Kutzen and Carino aided and abetted and caused violations of the same. While the firm and both owners consented to the entry of the SEC’s order without admitting or denying the findings, AlphaBridge and Kutzen are censured while Carino is barred from the securities industry for at least three years. The firm will pay $4 million in disgorgement, nearly $1 million in penalties and will close down the funds.
Undoubtedly, this type of firm and broker misconduct can cause investors to suffer great financial loss. Fortunately, investors have rights and may be able to recover their losses through securities arbitration or the courts.
If you have been financially affected by the actions of AlphaBridge, Kutzen, Carino, Evans or the misconduct of any financial adviser, you may be entitled to some measures of recovery. Silver Law Group’s experienced attorneys seek to help you get back what you have lost at the hands of financial advisers.
You can expect a complimentary consultation with a skilled attorney who can help you navigate the sometimes overwhelming landscape of securities arbitration. Every case at Silver Law Group is handled on a contingent fee basis, in which you do not pay legal fees unless we win your case.
For more information, contact us today.