A father-son team of investment advisers are facing civil securities fraud charges relating to the <"http://www.yourlawyer.com/topics/overview/Arthur_Nadel_Ponzi_Scheme">Arthur Nadel Ponzi scheme. The Securities and Exchange Commission (SEC) alleges that Neil and Christopher Moody misled investors about the financial condition of three hedge funds they managed, and misrepresented that they controlled the funds’ investment and trading activities when in fact they were being handled by Nadel.
Nadel, who was indicted last year on 15 fraud counts, was president of Sarasota-based Scoop Management. The hedge funds managed by Scoop included Viking IRA, Valhalla Investment Partners LP, Viking, Victory, Victory IRA and Scoop Real Estate. Nadel reportedly told his 350 investors that his funds held $360 million, but in truth, they only held around $125,000.
Nadel disappeared last January, a day before he was to deliver a $50 million payout to investors. He left his family a purported suicide note, but it was always suspected that Nadel was alive and on the run. Nadel eventually turned himself in.
The SEC complaint alleges that the Moodys disseminated misleading materials to investors about their hedge funds Valhalla Investment Partners L.P., Viking IRA Fund LLC, and Viking Fund LLC from at least 2003 through December 2008 According to the Commission, the materials misrepresented the hedge funds’ historical investment returns and overstated their asset values by as much as $160 million
According to the SEC, the Moodys based their materials on grossly overstated performance numbers that Nadel created and provided to them. The SEC also alleges that the Moodys failed to independently verify the accuracy of the figures despite multiple red flags, and relied exclusively on Nadel’s inaccurate information when communicating with investors.
In its complaint against the Moodys, the SEC seeks permanent injunctions, financial penalties, and disgorgement of illegal gains. Without admitting or denying the SEC’s allegations, the Moodys have consented to permanent injunctions against future securities fraud violations. The Moodys also consented to the entry of a Commission order that will bar them for five years from associating with any investment adviser.