SEC moves forward with fraud investigation of investment business

On Behalf of | Feb 6, 2017 | Securities |

The Securities and Exchange Commission (SEC) is investigating an investment business that is accused of misappropriating almost $4 million in funds from investors.

What are the accusations? The business is accused of misleading investors on the use of the money that was given to the business. Investors were allegedly told the money would go towards “up-and-coming hedge fund managers for investment purposes.”

The SEC is investigating allegations that the funds were not transferred as promised – that the money did not really go to hedge fund managers as they were told. Instead, the federal agency is looking into whether the funds were commingled with other accounts in a “scheme to siphon away investor funds” and use significant portions of the investments for “personal use and unauthorized business expenses.”

What are the potential penalties? If the investigation supports the claims, the business could face “disgorgement and penalties.”

Disgorgement is defined by Black’s Law Dictionary as the “act of giving up something (such as profits illegally obtained) on demand or by legal compulsion.” This form of punishment is designed to “deprive the wrongdoer of his or her ill-gotten gains and to deter violations of the law.”

What lessons are present in this case? Business owners and investors alike can learn from this case. Business owners in similar sectors should note the harshness of the penalties associated with these charges. It is also important to note that the ramifications of the accusations alone can be crippling for any business. In addition, investors can learn the importance of prudently watching their funds and holding those who misappropriate funds accountable for their actions.

One option to better preserve your business interests is to contact an attorney. Your lawyer can review the issue and develop a strategy to better ensure your interests are protected.

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