The Securities and Exchange Commission has charged an Atlanta investment adviser and an entity he controls with defrauding a private fund they managed and its investors.
The SEC’s complaint alleges that beginning in August 2009 and continuing until at least June 2018, Joseph A. Meyer Jr. and his company Statim Holdings Inc. offered and sold four classes of limited partnership interests in Arjun L.P., a private fund.
Meyer is accused of promising investors that, in return for giving up substantial portions of their profits, investors in one class would be protected from losses, a feature he called “No Loss Protection,” while investors in two other classes would receive guaranteed fixed returns.
The complaint alleges that Meyer told investors that the relinquished profits would be used to fund the “No Loss Protection” and guaranteed returns when Arjun had insufficient profits. However, Meyer allegedly withdrew most of the relinquished profits and used the funds to pay his living expenses.
The SEC claims that “Meyer had Arjun’s fund administrators occasionally record a receivable due from Statim on Arjun’s financial statements to deceive investors into believing that Statim was making good on its guarantees and loss protection.”
The SEC added, “Even when Meyer purported to pay down the receivable, he actually did so by directly or indirectly borrowing money from the fund. Thus, the purported guarantees and loss protection were illusory—backed by nothing other than a receivable that, at times, grew as high as $2.9 million, or 11.5 percent of Arjun’s net asset value.”
The SEC’s complaint alleges that Meyer and Statim violated certain antifraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934, and the Investment Advisers Act of 1940, and that Meyer aided and abetted Statim’s violations of these provisions. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.