SEC Brings Charges Against Three Firms In October

The SEC brought charges against Southridge Capital Management, LLC and Southridge Advisors, LLC the week of October 25th 2010. It was the third case brought by them this month alone against a hedge fund for wrongdoings. Stephen M. Hicks and his investment advisory businesses were charged with defrauding investors by over evaluating fund positions, making material misrepresentations and using investor’s money to pay expenses of other funds that were illiquid.

Just a week earlier, the SEC charged two other hedge fund managers and their advisory businesses, PEF Advisors, LTD and PEF Advisors, LLC, with defrauding investors by over evaluating illiquid fund assets. Finally at the beginning of the month, the SEC hit Palm Beach Capital Management, LP and Palm Beach Capital Management, LLC for fraudulently funneling over $1 billion of investor’s money into a Ponzi scheme.

In related court cases, Arthur Nadel, the 77 year old founder of Scoop Management, Inc. in Sarasota, FL, pled guilty in a 15 count indictment for defrauding investors and was sentenced to 14 years in prison. He was also ordered to forfeit the $162 million he made from the scheme. Joseph Contorinis, another hedge fund manager, was sentenced to 145 years in prison and fined #35 million in fines for securities fraud and insider trading.

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