SEC Alleges that a Hedge Fund, Its Owner and Its Chief Trader Illegally Earned $57 Million in a Late-Trading Scam.

The Securities and Exchange Commission filed suit in a New York Federal Court contending that Simpson Capital Management Inc., its owner and its head trader entered into late-trades in hundreds of mutual funds, defrauding the funds and their shareholders of approximately $57 million.

The SEC claims that the defendants placed more than 10,000 unlawful mutual fund trade orders after the market closed, enabling them to take advantage of knowledge of after-market events while receiving the price previously established that day as the fund’s closing net asset value. Simpson Capital is the investment adviser to two hedge funds, Simpson Partners L.P. and Simpson Offshore Ltd.

The SEC further charged that the firm’s owner, who was also an investor in the Simpson Funds, “personally earned at least $19 million in fees and profits” as a result of the fraudulent transactions, adding that the head trader “received more than $996,000 in salary and bonuses during the late trading scheme.” The SEC is asking the court to order permanent injunctions, disgorgement plus prejudgment interest, and civil penalties.

This suit is one of many civil and criminal actions initiated by the SEC and other regulators for improprieties in the operation of hedge funds, as well as actions regarding the late trading of mutual funds by hedge funds, high profile Wall Street investment banks, mutual fund advisors and individuals.

Shepherd Smith and Edwards is committed to fighting for the rights of investors that are the victims of securities fraud. We have helped thousands of U.S. investors recover their financial losses. Call Shepherd Smith and Edwards at 1-800-259-9010 for your free consultation.

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SEC’s Complaint filed in the NY Federal Court

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