Friday, 1 August 2014
Last updated 1 hour ago
Jun 4 2012 | 1:25pm ET
The Securities and Exchange Commission has charged New York-based fund manager Jason J. Konior and his two firms—Absolute Fund Advisors and Absolute Fund Management—with running what amounts to a Ponzi scheme.
Konior raised $11 million selling investors limited partnership interests in Absolute Fund, an investment vehicle that Konior claimed had $220 million in trading capital. The SEC says Konior told investors the fund would “allocate millions of dollars in matching investment funds, place the combined funds in brokerage accounts through which investors could trade securities, and operate a ‘first loss’ trading program that would allow investors to dramatically increase their potential profits.”
Instead, alleges the market watchdog, Konior and firms siphoned off about $2 million to pay redemptions from earlier investors and cover their personal and business expenses.
The SEC obtained an asset freeze against Konior and his companies last week in federal court in Manhattan.
“Konior falsely portrayed Absolute Fund as a legitimate investment vehicle designed to maximize investors’ access to trading capital in order to grow their hedge fund businesses,” said Bruce Karpati, co-chief of the SEC enforcement division’s asset management unit. “In reality, Konior’s operation became a way for Konior to funnel cash to his firms and himself for unauthorized purposes.”
The SEC’s complaint charges Konior, AFA, and AFM with violating the antifraud provisions of the Securities Exchange Act of 1934 and seeks, among other things, permanent injunctive relief, disgorgement of ill-gotten gains and financial penalties.
Konior and his firms have neither admitted nor denied the allegations but have consented to the entry of an order freezing their assets, imposing a preliminary injunction against further violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and providing other relief.