The Securities and Exchange Commission (SEC) has secured a final judgment setting disgorgement of USD1,29,800 and a civil penalty of USD300,000 against OM Investment Management and Gignesh Movalia.
The SEC action arose from the defendants’ efforts to fraudulently raise money for the OM Global Investment Fund, an unregistered pooled investment vehicle formed in 2009, to acquire pre-IPO shares of Facebook.
In its complaint filed on 27 September 2013, the Commission alleged OMIM and Movalia falsely represented to a group of investors their interest in Facebook stock would be segregated in a special “side pocket” within the fund, when in reality, the shares were commingled with other fund investments.
OMIM and Movalia also distributed false account statements to investors reflecting the purported value of their Facebook investments, even though the fund had sold all of its Facebook positions months earlier.
In addition, Movalia, among other things (i) improperly used investor proceeds to make undisclosed loans to related third parties in contravention of the fund’s stated investment strategy; (ii) attempted to evade a corporate monitorship instituted in a related Florida state court private lawsuit by forming a new entity with an almost identical name to the fund and using that entity to solicit additional investments in the fund; and (iii) failed to register the fund as an investment company and also failed to register the offer and sale of investments in the fund.
