SEC Charges Hedge Fund Managers with Fraud for Side Pocket Valuation and Theft of Investor Assets


The Securities and Exchange Commission filed a complaint on October 19 in the U.S. District Court for the Northern District of Georgia against hedge fund portfolio managers Paul Mannion, Jr. and Andrew Reckles and their investment advisory entities, PEF Advisors LLC and PEF Advisors Ltd., for defrauding investors in the Palisades Master Fund, L.P. According to the complaint, Mr. Mannion and Mr. Reckles knowingly or recklessly overvalued Fund investments that they placed in a “side pocket” and charged excessive management fees to the Fund while simultaneously selling millions of dollars worth of the same securities from their personal accounts. The complaint also alleges that the defendants stole and exercised warrants belonging to the Fund, misappropriated investor cash and securities on other occasions to make personal investments, and made material misrepresentations regarding their short trading positions in order to participate in a PIPE transaction. The SEC is charging defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and is seeking injunctive relief, disgorgement of profits, prejudgment interest and financial penalties.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Written by:


Katten Muchin Rosenman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.