SEC Charges Investment Adviser with Stealing Millions from Private Fund
The Securities and Exchange Commission has revoked the registration of a Seattle-based registered investment adviser and barred its principal from the securities industry for allegedly stealing millions of dollars from a private fund the adviser managed.
The Securities and Exchange Commission has revoked the registration of a Seattle-based registered investment adviser and barred its principal from the securities industry for allegedly stealing millions of dollars from a private fund the adviser managed. The remaining assets will be liquidated and placed in a fund for distribution to harmed investors.
According to the SEC’s order, Dennis Gibb, the owner of Sweetwater Investments Inc., stole more than $3 million from Sweetwater Income Flood LP to pay for personal expenses, including his mortgage and car payments and to keep Sweetwater’s business afloat.
To hide his alleged theft and convince investors to put more money into the fund, the SEC claims that Gibb sent fraudulent account statements and tax documents to investors. The false documents showed that there was $7.8 million in the fund, when there was only about $1.8 million.
Gibb also falsely reported in SEC filings that Income Flood had been audited, and that Sweetwater had over a billion dollars in assets under management, when in actuality it had only $73 million. Gibb failed to hire an independent auditor or have a surprise verification of the fund’s assets conducted. Gibb’s fraud was discovered by the SEC’s San Francisco office of compliance inspections and examinations staff when they conducted an examination of Sweetwater.
“The diligence of the SEC’s regional examination staff was critical in uncovering Gibb’s fraud,” said Erin Schneider, associate director for the SEC’s San Francisco regional office. “As a result, the remaining funds will be preserved and returned to harmed investors.”
The settled order finds that Gibb and Sweetwater violated the anti-fraud and custody provisions of the federal securities laws and made false statements in SEC filings. The SEC’s order also finds that Gibb and Sweetwater are liable for disgorgement of money stolen, plus prejudgment interest.
Gibb recently pleaded guilty to criminal charges in a parallel action by the U.S. Attorney’s Office for the Western District of Washington.
