SEC amends complaint in fraudulent mutual fund case and settles with two defendants – Ofer Abarbanel – Victor Chelli
Securities and Exchange Commission v Ofer Abarbanel et al., No. 21-cv-05429 (SDNY filed June 21, 2021)
Washington, DC (STL.News) The Securities and Exchange Commission amended the complaint in its civil fraud case to bring additional charges against a California resident Abarbanel offer and others, and also obtained consent judgments against two other participants in the scheme, resulting in the return of more than $77 million to aggrieved investors.
The original SEC complaint in this case, filed in June 2021, alleged that Abarbanel offer and Victor Chilli engaged in a scheme to defraud investors in an offshore fund, the Income Collecting 1-3 Months T-Bills Mutual Fund, beginning in March 2018. As described in the complaint, after promising to invest in Treasury securities US and reverse repurchase agreements, the defendants instead funneled the funds’ assets to shell companies under their control under fictitious unsecured loan agreements. The SEC accused Abarbanel, Chelli and the Revenue Collection Fund for violating anti-fraud provisions of federal securities laws, named as defendants six companies that received investor assets in connection with the scheme, and obtained an asset freeze to protect remaining investor funds.
On January 27, 2022, the SEC amended its complaint, alleging that the conduct regarding the Revenue Collection Fund was part of a larger fraudulent scheme. As alleged, beginning around March 2017, Abarbanel and others under his direction also used a scheme to deceive and defraud investors in an SEC-registered mutual fund, State Funds – Enhanced Ultra-Short Duration Mutual Fund, by entering into unsecured loan transactions with shell companies that the defendants controlled and misappropriated investors’ funds for high-risk business and other unauthorized purposes. The amended complaint adds New York Alaska ETF Management LLC, the investment adviser previously registered with State Funds, as a defendant.
The amended complaint, filed in federal court for the Southern District of New York, accuses Abarbanel, Chelli, New York Alaska and the Income Collecting Fund of violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and of Section 10.(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, accuses Abarbanel and New York Alaska of violating the anti-fraud provisions of Sections 206(1), (2) and (4) of the Investment Advisers Act 1940 and Rule 206(4)-8 thereunder and section 34(b) of the Investment Companies Act 1940, and seeks an injunction, restitution with interest before judgment and civil penalties.
On January 31, 2022, the District Court entered a final consent judgment prohibiting the Revenue Collection Fund from future violations of Section 17(a) of the Securities Act and Section 10(b). ) of the Exchange Act and Rule 10b-5 thereunder and ordering the payment of restitution and prejudgment interest of $111,591,312, which shall be deemed satisfied by the distribution of at least $76,944,775 $ to harmed investors.
On February 25, 2022, the District Court entered a consent judgment enjoining Chelli from future violations of Section 17(a) of the Securities Act and Section 10(b) of the Securities Act. Exchanges and Rule 10b-5 thereunder, imposing a permanent bar against Participant in future securities offerings and ordering him to pay restitution and prejudgment interest of $4,939,733, which shall be deemed satisfied by the distribution of all funds in the accounts of certain defendants in reparation to the injured investors.
Ongoing SEC litigation is being conducted by Paul W. Kisslinger under the supervision of Olivia S. Choe.
THE SOURCE: DRY