Father-and-Son Hedge Fund Managers Charged with Fraud in Connection with the Use of Backtested Performance

April 18, 2012

The SEC charged Gabriel and Marco Bitran, who have a father-son relationship and are both based in Boston, with securities fraud for misleading investors about their investment strategy and past performance.  The SEC’ found that Gabriel and Marco Bitran raised millions of dollars for their hedge funds through GMB Capital Management LLC and GMB Capital Partners LLC by falsely telling investors they had a lengthy track record of success based on actual trades using real money.  The SEC alleges that the Bitrans knew the track record was based on back-tested hypothetical simulations. The Bitrans also misled investors in certain hedge funds to believe they used quantitative optimal pricing models devised by Gabriel Bitran to invest in ETFs and other liquid securities. Instead, they merely invested the money almost entirely in other hedge funds. GMB Capital Management later provided false documents to SEC staff examining the firm’s claims in marketing materials of a successful track record.

The Bitrans agreed to be barred from the securities industry and pay a total of $4.8 million to settle the SEC’s charges.

Click http://www.sec.gov/litigation/admin/2012/33-9315.pdf to access the administrative action.


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