SEC ANNOUNCES PRISON TERM AND RESTITUTION PAYMENT ORDER FOR INVESTMENT ADVISOR

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Massachusetts Investment Adviser Sentenced to 36 Months in Jail for Defrauding Investors

The Securities and Exchange Commission (Commission) announced that, on December 11, 2013, Judge Denise J. Casper of the United States District Court for the District of Massachusetts sentenced former Plymouth, Massachusetts investment adviser Jeffrey A. Liskov (Liskov) to serve a prison term of 36 months, followed by a supervised probationary period of 3 years, and to pay $3,003,147 in restitution. The sentence was imposed in connection with Liskov’s guilty plea in July 2013 to a one-count criminal Information charging him with willfully violating Section 206 of the Investment Advisers Act of 1940 (Advisers Act).

The Commission previously filed a civil action against Liskov and his former advisory firm, EagleEye Asset Management, LLC (EagleEye), for defrauding their clients in connection with foreign currency exchange (forex) investments. The factual allegations in the criminal Information are substantially similar to those in the Commission’s complaint in the civil case.  The Commission’s complaint, filed on September 8, 2011, alleged that, between at least November 2008 and August 2010, Liskov made material misrepresentations to several advisory clients to induce them to liquidate investments in securities and instead invest in forex. The forex investments resulted in client losses totaling nearly $4 million, while EagleEye and Liskov pocketed over $300,000 in performance fees. The Commission alleged that Liskov’s strategy was to generate temporary profits on client forex investments to enable him to collect performance fees, after which client forex investments invariably quickly declined in value.

According to the Commission’s complaint, Liskov made material misrepresentations or failed to disclose material information to clients concerning the nature of forex investments, the risks involved in forex, and Liskov’s poor track record in forex trading for himself and other clients. The Commission’s complaint further alleged that, as to two clients, without their knowledge or consent, Liskov liquidated securities in their brokerage accounts and transferred the proceeds to their forex trading accounts where he lost nearly all their funds, but not before first collecting performance fees on temporary profits in these clients’ forex accounts. The complaint alleged that Liskov accomplished the unauthorized transfers by using “white out” correction fluid to change dates, amounts, and other data on asset transfer documentation. Liskov also opened multiple forex trading accounts in the name of one client, without obtaining the client’s consent, thereby maximizing his ability to earn performance fees on the client’s forex investments.

As result of the foregoing conduct, the Commission alleged that EagleEye and Liskov violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Advisers Act. The Commission also alleged that EagleEye failed to maintain certain books and records required of investment advisers in violation of Section 204 of the Advisers Act and Rule 204-2 thereunder, and that Liskov aided and abetted EagleEye’s violations of these recordkeeping provisions.

After an eight-day trial in the Commission’s civil case, on November 26, 2012, a jury found that EagleEye and Liskov violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 206(1) of the Advisers Act. After a further hearing, United States District Court Judge William G. Young found that EagleEye and Liskov violated Section 204 of the Advisers Act and Rule 204-2 thereunder, concerning recordkeeping obligations relating to EagleEye’s business. On December 12, 2012, the Court entered a final judgment against EagleEye and Liskov in the Commission’s action, ordering that they be permanently enjoined from future violations of the foregoing provisions of the securities laws. The Court also ordered EagleEye and Liskov to pay, jointly and severally, disgorgement of their ill-gotten gains in the amount of $301,502.26, plus pre-judgment interest on that amount of $29,603.59, and each to pay a civil penalty of $725,000.

On December 27, 2012, the Commission instituted public administrative proceedings against each of EagleEye and Liskov to determine what sanctions against them, if any, would be appropriate and in the public interest. On July 24, 2013, an administrative law judge revoked EagleEye’s registration as an investment adviser and barred Liskov from, among other things, associating with any investment adviser. On September 23, 2013, the Commission issued orders of finality in the administrative proceedings against EagleEye and Liskov.

The Commission acknowledges the assistance of Secretary of the Commonwealth of Massachusetts William F. Galvin’s Securities Division and the United States Commodity Futures Trading Commission, both of which filed cases against EagleEye and Liskov in September 2011.

COMPANY AND PRINCIPAL RECEIVE FINAL JUDGEMENT FOR PARTS IN FOREX SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Court Enters Final Judgment Against Massachusetts Investment Adviser and its Principal, Orders Payment of Over $1.7 Million in Illicit Gains and Penalties

The Securities and Exchange Commission announced that, on December 12, 2012, a federal judge in Boston, Massachusetts entered a final judgment against registered investment adviser EagleEye Asset Management, LLC, and its sole principal, Jeffrey A. Liskov, both of Plymouth, Massachusetts, in an action the Commission previously filed against them. The Commission’s action alleged that that the defendants defrauded advisory clients concerning foreign currency exchange ("forex") trading.

On November 26, 2012, after an eight-day trial, a federal jury found that EagleEye and Liskov violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 206(1) of the Investment Advisers Act of 1940. After a judicial hearing on remedies, Judge William G. Young also found violations by EagleEye and Liskov of Section 204 of the Advisers Act and Rule 204-2 thereunder, concerning their obligation to maintain true, accurate, and current certain books and records relating to EagleEye’s investment advisory business. The court ordered that EagleEye and Liskov are permanently enjoined from future violations of the foregoing provisions of the securities laws. The court further ordered EagleEye and Liskov to pay, jointly and severally, disgorgement of their ill-gotten gains in the amount of $301,502.26, plus pre-judgment interest on that amount of $29,603.59. The court also ordered EagleEye and Liskov each to pay a civil penalty of $725,000.

In its complaint, filed on September 8, 2011, the Commission alleged that, between at least November 2008 and August 2010, Liskov made material misrepresentations to several advisory clients to induce them to liquidate investments in securities and instead invest the proceeds in forex trading. The forex investments, which were not suitable for older clients with conservative investment goals, resulted in steep losses for clients, totaling nearly $4 million, but EagleEye and Liskov came away with over $300,000 in performance fees, in addition to other management fees they collected from clients. Liskov’s strategy was to generate temporary profits on client forex investments to enable him to collect performance fees, after which client forex investments invariably would sharply decline in value.

According to the Commission’s complaint, Liskov made material misrepresentations or failed to disclose material information to clients concerning the nature of forex investments, the risks involved, and his poor track record in forex trading for himself and other clients. The Commission’s complaint further alleged that, in the case of two clients, without their knowledge or consent, Liskov liquidated securities in their brokerage accounts and transferred the proceeds to their forex trading accounts where he lost nearly all client funds, but not before first collecting performance fees for EagleEye (and ultimately himself) on short-lived profits in the clients’ forex accounts. The complaint alleged that Liskov accomplished the unauthorized transfers by doctoring asset transfer forms. On several occasions, Liskov took old forms signed by the clients and used "white out" correction fluid to change dates, asset transfer amounts, and other data. Liskov also used similar tactics to open multiple forex trading accounts in the name of one client, thereby maximizing his ability to earn performance fees for EagleEye (and ultimately himself) on the client’s investments, all without disclosing this to the client or obtaining the client’s consent.

The Commission alleged that, as a result of this conduct, EagleEye and Liskov violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Advisers Act. The Commission also alleged that EagleEye failed to maintain certain books and records required of investment advisers in violation of Section 204 of the Advisers Act and Rule 204-2 thereunder, and that Liskov aided and abetted EagleEye’s violations of these provisions.

The Commission acknowledges the assistance of Secretary of the Commonwealth of Massachusetts William F. Galvin’s Securities Division and the Commodity Futures Trading Commission, both of which filed related cases against the defendants in September 2011.