SEC Charges New York-Based Hedge Fund Managers With Securities Fraud

November 10, 2011

The SEC charged ThinkStrategy Capital Management, LLC (ThinkStrategy) and managing director Chetan Kapur with deceptive conduct in connection with two hedge funds that they managed and advised: ThinkStrategy Capital Fund (Capital Fund) and TS Multi-Strategy Fund (Multi-Strategy Fund).


The Capital Fund traded primarily equities, while the larger Multi-Strategy Fund holds investments in other hedge funds.  The complaint alleges that over nearly seven years, ThinkStrategy and Kapur engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials, by materially overstating the performance of the Capital Fund, giving investors the false impression that the fund’s returns were consistently positive and minimally volatile. The complaint also alleges that ThinkStrategy and Kapur repeatedly inflated the firm’s assets, exaggerated the firm’s longevity and performance history, and misrepresented the size and credentials of ThinkStrategy’s management team.

With respect to the Multi-Strategy Fund, a fund of hedge funds, the complaint alleges that ThinkStrategy and Kapur misstated the scope and quality of due diligence checks on certain managers and funds selected for inclusion in the portfolio. Specifically, the complaint alleges that ThinkStrategy and Kapur told investors that all funds in the portfolio would be selected using a rigorous due diligence process, including having reputable service providers, but instead selected several funds that failed to meet this standard. As a result, the Multi-Strategy Fund made investments in certain hedge funds that were later revealed to be Ponzi schemes or other serious frauds, including Bayou Superfund, Valhalla/Victory Funds, and Finvest Primer Fund.

Click here to access this litigation release.


Categories

Enforcement Actions, Investment Advisers