SEC Charges Fund Manager in Scheme Involving Risky Mortgage-Related Investment
The Securities and Exchange Commission today announced charges against an investment fund manager with offices in California and Arizona who is allegedly deceiving investors about the safety and performance of their investments, which involve risky collateralized mortgage obligations (CMOs).
The SEC alleges that George Charles Cody Price of La Jolla, Calif., raised $18 million for three investment funds through his firm ABS Manager LLC, and he promised investors that their money was secured by government-backed bonds yielding extraordinary double-digit returns as high as 18 percent per year. Price used the tagline "Your Flight to Safety" in marketing one of those funds. However, Price was actually investing in one the riskiest tranches of CMOs on the market, and the investments failed to achieve the returns that Price promised and sometimes even lost money. Price concealed the actual performance of these risky bonds by providing fake monthly statements to investors that inflated the value of the investments.
The SEC further alleges that Price, who regularly co-hosted a radio show in the San Diego area called "The Wealth Weekend Hour" and recommended that listeners invest in one of his funds, also stole a half-million dollars of fund assets in the form of purported fees, and grossly inflated the assets under his management to misrepresent his prominence as an investment manager as he solicited investors.
The SEC's complaint charges Price and ABS Manager with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-8(a) thereunder. Price's three investment funds (ABS Fund, LLC [Arizona], ABS Fund, LLC [California], and Capital Access, LLC) are named as relief defendants along with his company Cavan Private Equity Holdings LLC and his wife's company Lucky Star Events LLC because they hold cash or other assets acquired from the fund assets.
Concurrent with filing the complaint, the SEC also sought a temporary restraining order, asset freeze, receiver, order prohibiting the destruction of documents, and an accounting. The SEC sought to file the action under seal. In an Order dated February 11, 2013, United States District Court Judge Gonzalo Curiel denied the requests at this time.
The SEC's investigation was conducted by Morgan B. Ward Doran, Janet Weissman, and Carol Shau of the Los Angeles Regional Office. Sam Puathasnanon and Lynn Dean will lead the litigation.
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