U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23959 / October 4, 2017
Securities and Exchange Commission v. Tweed Financial Services, Inc. et al., No. 17-cv-7251 (C.D. Cal. filed Oct. 2, 2017)
SEC Charges Adviser with Sending False and Misleading Account Statements to Investors of Fund He Managed
The Securities and Exchange Commission filed fraud charges on October 2 against a San Marino, California advisory firm and against its owner with misleading investors about the profitability of a fund they managed until SEC examiners discovered the fraud.
The SEC’s complaint alleges that Tweed Investment Services, Inc. (TISI), a San Marino, California advisory firm, and Robert Russel Tweed, TISI’s owner, formed Athenian Fund L.P. and raised more than $1.7 million from 24 investors. The complaint alleges that the investor funds were supposed to be invested in a master fund that would use a quantitative stock trading strategy. Instead, according to the complaint, Tweed and TISI invested the funds in two other investments that ultimately lost approximately $800,000, and then concealed those losses from the investors by issuing false and misleading account statements that made the fund appear as if it was profitable. The complaint also alleges that investors who were able to redeem their interests received more money than they were entitled to because their redemptions were based on inflated asset values. The complaint further alleges that Tweed and TISI misled investors for years, and only disclosed the losses after SEC examiners and state regulators uncovered the fraud during routine examinations.
The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges Tweed and TISI with violating Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint seeks permanent injunctions and civil penalties.
The SEC’s investigation was conducted by DoHoang T. Duong and Carol Shau and supervised by Diana Tani of the Los Angeles Regional Office. The examination that led to the investigation was conducted by Jennifer L. Spicher and Thomas J. Meier and supervised by Joshua Herbst of the agency’s Chicago Regional Office. The litigation will be led by Lynn Dean and supervised by Amy Longo.