QED Benchmark Management LLC and its hedge fund manager Peter Kuperman will resolve U.S. Securities and Exchange Commission charges accusing them of misleading investors about the QED Benchmark LP hedge fund’s historical performance and investment strategy. As part of their settlement they will pay back investors $2.8M in losses. However, by settling they are not admitting or denying the charges.
According to the SEC, the investment advisory firm and Kuperman did not disclose to investors that there were heavy trading losses. They purportedly did this by using a combination of real and hypothetical returns when giving out information about performance history. Marketing strategy included proposing to abide by a scientific stock-selection strategy using algorithms to concentrate on over 280 metrics in the areas of value, momentum, risk, growth, and estimates. The fund was supposed to select investments using the metrics to determine which ones would do better in the market.
QED’s offering memorandum and its limited partnership agreement said that no more than 20% of assets could be invested in any one security, while no more than 5% could be invested in a security that was illiquid. The SEC said that none of these agreements were honored.
Because of these alleged misrepresentations, QED Benchmark and Kuperman were able to secure millions of dollars from investors. The two of them are accused of not following the fund’s stated investment plan and placing most of the assets into one penny stock. Misleading and incomplete disclosures about the investment’s liquidity and value were also purportedly made. In just the first quarter that stock earned a 79% loss. When Kuperman presented potential investors with 2009 results, he did not disclose the bad returns and used hypothetical returns instead.
The SEC said that Kuperman invested the fund’s money Emo Capital Corp., which was run by two individuals, one of whom has since pled guilty to securities fraud. Kuperman didn’t tell investors about this investment nor that he had a conflict of interest. In exchange for investing the fund’s money in Emo Capital, the individuals behind it agreed to help Kuperman find more clients.
In 2013, when investors began to inquire about how to redeem their investments and asked for information about the Fund’s performance, Kuperman downplayed the financial problems even though by that time the Fund had almost no liquid assets. He also said that he was restricting redemption orders.
According to the SEC’s order, which institutes a settled administrative proceeding, QED Benchmark Management LLC and Kuperman violated the Securities Exchange Act of 1934, the Securities Act of 1993, and the Investment Advisers Act of 1940. In addition to repaying investors, Kuperman will pay a $75K penalty, and he has agreed to be barred from the industry.
If you believe that your financial adviser did not give you all of the information that you needed for your investment or misrepresented an investment you became involved in, please contact our investment adviser fraud law firm right away. Shepherd Smith Edwards and Kantas, LTD LLP has helped thousands of investors to recoup their losses. Even if the federal government has brought a claim against your adviser or broker, you will want an experienced securities law firm advocating exclusively on your behalf and fighting for your right to financial recovery. Contact us today.
The SEC Order (PDF)