SEC takes emergency action to freeze Northshore Asset Management
The SEC has filed an emergency enforcement action to halt an alleged USD 37m fraud by Northshore Asset Management LLC (Northshore) and its principals.
The action, which seeks asset freezes, accounting records and the appointment of a temporary receiver over the Chicago-based investment adviser and its three principals, concerns the alleged misappropriation of assets of two hedge funds, Ardent Research Partners, L.P. (Ardent Domestic) and Ardent Research Partners, Ltd. (Ardent Offshore).
In its complaint, the Commission alleges that Northshore, through its principals, diverted approximately USD 37 million of the funds' assets to their control and invested them in illiquid securities of, and made loans to, entities in which Northshore and its principals have interests.
In its complaint, the Commission names Northshore, Ardent Domestic, Ardent Offshore (collectively, the Ardent Funds), Saldutti Capital Management, L.P. (SCM), Kevin Kelley, Robert Wildeman and Glenn Sherman.
The Commission's complaint further alleges that:
* the defendants did not disclose to the Ardent Funds' investors that Northshore had purchased SCM, investment adviser to the Ardent Funds, and, that Northshore was now managing a significant portion of the Ardent Funds' assets;
* the defendants made numerous misrepresentations concerning (i) the nature of the investments, (ii) the liquidity of the investments, and (iii) the use of investor funds for undisclosed loans; and for the last several months, the defendants have refused to honor valid redemption requests from Ardent Domestic investors.
Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, stated: "This action demonstrates that the Commission will act quickly to preserve the assets of defrauded investors."
Schonfeld added: "This case also emphasizes the Commission's determination to hold hedge fund managers accountable when they knowingly participate in schemes that defraud investors."
In its emergency enforcement action, the Commission is seeking, among other emergency relief, a temporary restraining order (i) freezing the defendants' assets; and (ii) appointing a temporary receiver over Northshore, SCM, Ardent Domestic, and Ardent Offshore.
In addition to this emergency relief, the Commission also seeks orders enjoining the defendants, preliminarily and permanently, from committing future violations of the federal securities laws, and a final judgment ordering the defendants to disgorge ill-gotten gains, and assessing civil penalties.
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