Enforcement: SEC gets Moody over Nadel sub-funds
The USA's Securities and Investment Commission has issued fraud proceedings against Neil V Moody and his son Christopher D Moody alleging that they lied when they said they managed funds and that, in fact, the funds were managed by Arthur G Nadel, who was charged with fraud last year. The trouble was - Nadel was producing fictitious figures, the SEC says.
The SEC alleges that Neil V. Moody and his son, Christopher D. Moody, distributed offering materials, account statements, and newsletters to investors that misrepresented the hedge funds' historical investment returns and overstated their asset values by as much as USD160 million. The Moodys based their materials on grossly overstated performance numbers that Nadel created and provided to them. The Moodys failed to independently verify the accuracy of the figures despite multiple warning signs and relied exclusively on Nadel’s inaccurate information when communicating with investors, says the SEC.
When the SEC charged Nadel last year, it obtained an emergency injunction freezing his assets.
The SEC's complaint further alleges that the Moodys misled investors regarding their role in managing the assets of the three hedge funds by claiming that they controlled all of the investment and trading decisions. In truth, under an arrangement that the Moodys had with Nadel, he controlled nearly all of the funds’ investment and trading activities with no meaningful supervision or oversight by the Moodys.
In its complaint against the Moodys, the SEC seeks permanent injunctions, financial penalties, and disgorgement of illegal gains. Without admitting or denying the SEC's allegations, the Moodys have consented to permanent injunctions against future securities fraud violations. The Moodys also consented to the entry of a Commission order that will bar them for five years from associating with any investment adviser.
According to the SEC's complaint, filed in federal court in Tampa, Florida., Neil and Christopher Moody disseminated misleading materials to investors about their hedge funds Valhalla Investment Partners L.P., Viking IRA Fund LLC, and Viking Fund LLC from at least 2003 until the end of December 2008.
"The Moodys led investors to believe that they were faithfully managing funds invested with them," said Glenn S. Gordon, Associate Director of the SEC’s Miami Regional Office. "Instead, they abdicated their responsibilities to investors and ignored warning signs that should have alerted them to the fraud that was occurring all around them."
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