The U.S. Securities and Exchange Commission (“SEC”) has charged Stephen X. Kim and Spyglass Management, L.P. (“Spyglass”) with defrauding Houston-area investors out of more than $4 million. According to the SEC, the charges relate to the defendants’ roles in “defrauding Spyglass Capital Partners, L.P. (the “fund”), a pooled investment vehicle or “hedge fund” managed by Kim through Spyglass.”
[T]he Commission alleges that between in 2004 and 2006, Kim and Spyglass raised approximately $4.7 million from investors located primarily in Houston Texas using offering materials that contained misleading information relating to Kim’s education, business experience, and compensation. The SEC also alleges that Kim falsely told investors that he would pool their funds and employ an investment strategy of trading Collateralized Mortgage Obligations (“CMO”) and other securities, and that Kim would manage risk through a “dynamic hedging strategy.” Unfortunately, the SEC alleges, Kim and Spyglass failed to employ any hedging strategy to manage risk, and the fund incurred over $2 million in losses. Rather than disclose the losses to investors, the SEC alleges, Kim had Spyglass send false reports to investors indicating that the fund was profitable, and then Kim directed the fund to make approximately $1.7 million in Ponzi payments to investors. Finally, the SEC alleges that Kim misappropriated approximately $1.5 million of the hedge fund’s remaining assets to repay several outstanding personal obligations.
Notice two things about this case. First, notice the misrepresentations about Kim’s education and experience. Resume inflation is rampant in the securities industry. How comfortable would you be with an investment adviser who lied about his college degree?
Finally, notice the phony statements. Technology has made it possible for scam artists to produce account statements that only an expert can recognize as frauds.
Smart investors understand their vulnerability and take sensible precautions. Those who think they can size up an investment adviser or unregistered investment on their own often wind up starting over with nothing.
SEC Charges Houston Investment Adviser with $4.7 Million Fraud
The U.S. Securities and Exchange Commission (“SEC”) has charged Stephen X. Kim and Spyglass Management, L.P. (“Spyglass”) with defrauding Houston-area investors out of more than $4 million.
The U.S. Securities and Exchange Commission (“SEC”) has charged Stephen X. Kim and Spyglass Management, L.P. (“Spyglass”) with defrauding Houston-area investors out of more than $4 million. According to the SEC, the charges relate to the defendants’ roles in “defrauding Spyglass Capital Partners, L.P. (the “fund”), a pooled investment vehicle or “hedge fund” managed by Kim through Spyglass.”
Notice two things about this case. First, notice the misrepresentations about Kim’s education and experience. Resume inflation is rampant in the securities industry. How comfortable would you be with an investment adviser who lied about his college degree?
Finally, notice the phony statements. Technology has made it possible for scam artists to produce account statements that only an expert can recognize as frauds.
Smart investors understand their vulnerability and take sensible precautions. Those who think they can size up an investment adviser or unregistered investment on their own often wind up starting over with nothing.