US Securities and Exchange Commission (SEC) has sued New Jersey based Yorkville Advisors, a hedge fund advisory firm and two of its executives for miscalculating assets under management and exaggerating reported returns of hedge funds.
The manipulation committed by the firm and its advisors including Mark Angelo and Edward Schinik enabled it to conceal their losses and increase the fee collection from investors.
The market regulator alleged that the firm enticed the investors by falsely representing their entity as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure.
The case has been filed in the US District Court for the Southern District of New York, which states that the hedge fund pooled in over $280m in investments from pension funds and funds of funds.
Yorkville charged the funds at least $10m in excess fees based on the inflated values of its assets under management.
SEC Enforcement Division’s Asset Management Unit chief Bruce Karpati said the advisors lied to investors and the firm’s auditors as well as schemed to inflate fees by grossly overvaluing fund assets.
"We will continue to pursue hedge fund managers whose success is based on fiction rather than fact," Karpati added.