Chicago Hedge Fund Frozen After SEC Alleges Fraud

Sep 1 2011 | 8:23pm ET

The Securities and Exchange Commission has frozen the assets of a Chicago hedge fund, alleging that Neural Markets misled prospective investors.

The asset freeze, stemming from the SEC's lawsuit filed last month, also covers Neural founder Belal Faruki. According to the agency, Neural claimed to run a quantitative arbitrage hedge fund investing in exchange-traded funds. But the firm lied about managing outside capital and about its returns.

Neural continued to solicit investors until the SEC won a court order against the firm.

Faruki, in an interview with Dow Jones Newswires, denied the allegations. He said that Neural had never claimed to be a money manager or hedge fund, and that it never sought outside capital.

The investor the SEC says was defrauded out of $1 million is, in fact, a partner in Neural, Marc Tishfield, Faruki said.

"This partner has been blackmailing and attempting to extort money from the other partners," he added.

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