The Securities and Exchange Commission has revoked the registration of New York-based investment adviser International Investment Group LLC (IIG), which it recently charged with securities fraud for allegedly hiding losses in its flagship hedge fund and selling at least $60 million in fake loan assets to clients.
The SEC’s complaint alleges that IIG “grossly overstated” the value of defaulted loans in the fund’s portfolio to conceal losses in its flagship hedge fund and doctored the firm’s records to show that the defaulted loans had been repaid and that the proceeds had been used to make new loans. The SEC claims that there had been no repayment and the purported new loans were fake.
The complaint further claims that IIG sought to raise money to meet investor redemption requests and other liabilities by selling at least $60 million in fake trade finance loans to other clients. To deceive clients into purchasing these loans, an IIG employee allegedly had fake documentation created to substantiate the non-existent loans, including fake promissory notes and a forged credit agreement.
“This case shows that even sophisticated professional investors can fall victim to Ponzi schemes,” said Daniel Michael, chief of the SEC’s complex financial instruments unit. “The revocation of IIG’s registration is necessary to protect the public in light of IIG’s egregious breaches of its fiduciary duty as an investment adviser.”
IIG consented to a bifurcated settlement under which it is enjoined from future violations of the antifraud provisions of the federal securities laws. The judgment also imposes a preliminary asset freeze, but reserves the issue of any monetary relief, including disgorgement, prejudgment interest, and civil penalties, for further determination by the court.