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SEC Charges Fund Administrator Over Ignoring Warning Signs

Posted on August 17th, 2023 at 11:44 AM
SEC Charges Fund Administrator Over Ignoring Warning Signs

From the desk of Jim Eccleston at Ä¢¹½´«Ã½ 

The Securities and Exchange Commission (SEC) has settled charges against Theorem Fund Services LLC (TFS) for failing to respond to red flags relating to the commission of fraud against a private fund and its investors.

The SEC's order reveals that TFS offered administrative services to a fund overseen by EIA All Ä¢¹½´«Ã½ather Alpha Fund Partners and Andrew M. Middlebrooks. The SEC accused both of them of fraud in May 2022, alleging their involvement in a scheme that misappropriated and misused investors' funds over a span of five years. While working with TFS, the fund experienced notable losses due to trading actions by EIA and Middlebrooks. Nevertheless, as directed by EIA and Middlebrooks, TFS computed the Net Asset Value without acknowledging those losses. Furthermore, TFS sent out account statements to investors that substantially exaggerated the value of their investments.

The SEC concluded that TFS contributed to specific violations committed by EIA and Middlebrooks under the Securities Act of 1933 and the Investment Advisers Act of 1940, including Rule 206(4)-8(a)(1) beneath it. Without admitting or denying the SEC's conclusions, TFS consented to a cease-and-desist directive and a monetary fine of $100,000. Additionally, TFS committed to disgorge $18,000 and pay $4,271 in prejudgment interest.

 

Ä¢¹½´«Ã½ LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law

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