Wed, 04/02/2009 - 06:00
Federal judge Mark A. Pizzo yesterday signed an order to transfer hedge fund manager Arthur Nadel, based in Sarasota, Florida, to New York to face wire and securities fraud charges.
Nadel disappeared on 14 January but reappeared about two weeks later when he turned himself in to FBI authorities.
On 21 January the Securities and Exchange Commission charged Nadel with fraud in connection with six hedge funds for which he acted as the principal investment adviser.
According to the SEC's complaint, Nadel provided false and misleading information for dissemination to investors about the funds' historical returns and falsely overstated the value of investments in the funds by approximately USD300m.
According to the SEC's complaint, the funds appear to have total assets of less than USD1m. The complaint also alleges that Nadel recently transferred at leastUSD1.25m from two of the funds to secret bank accounts that he controlled.
The SEC also alleges that two entities with which Nadel was associated, Scoop Capital and Scoop Management, provided investment advice to all of the funds and also engaged in fraud as a result of Nadel's actions.
The SEC has obtained an emergency court order freezing defendants' assets and appointing a receiver.
David Nelson, director of the SEC's Miami regional office, says: 'Investors should be able to rely on the truthfulness of an account statement and offering materials. Mr. Nadel's alleged actions deceived investors, and we are seeking to hold him accountable for that misconduct.'
The six hedge funds and two other investment management companies are charged as relief defendants in the SEC's complaint. The SEC alleges that Nadel provided false and misleading information to the relief defendants for dissemination to investors through account statements and through offering memoranda.
US District Judge Richard A. Lazzara granted all of the emergency relief requested by the SEC, including a temporary restraining order, asset freeze, and other relief against Nadel.
The SEC's investigation is ongoing. Without admitting or denying the allegations of the SEC's complaint, Scoop Capital and Scoop Management consented to the entry of, among other things, preliminary injunctions, asset freezes, and the appointment of a receiver.
The SEC is seeking disgorgement plus prejudgment interest against each of the relief defendants (advisers Valhalla Management and Viking Management and hedge funds Scoop Real Estate, Valhalla Investment Partners, Victory IRA Fund, Victory Fund, Viking IRA Fund and Viking Fund).
Without admitting or denying the allegations of the complaint, they have consented to asset freezes and the appointment of a receiver.
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