SEC Says Calif. Investment Advisor Ran Ponzi Scheme

Jun 4 2012 | 1:41pm ET

The Securities and Exchange Commission has charged an investment adviser in Scotts Valley, Calif., with running a $60 million Ponzi scheme.

The industry watchdog says John A. Geringer, who managed the Scotts Valley, Calif.-based GLR Growth Fund, defrauding investors by “touting imaginary trading profits instead of reporting the actual trading losses he incurred.”

The SEC alleges Geringer used “false and misleading marketing materials” (some of which made references to the 25% returns generated in 2001 and 2002 by the fund—which was established in 2003) to convince investors the fund was generating double-digit annual returns placing 75% of its assets in investments tied to major stock indices.

In reality, according to the SEC’s allegations, Geringer’s trading generated consistent losses and he eventually gave it up all together, masking his fraud by paying millions of dollars in ‘returns’ to investors largely from monies received from newer investors.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, director of the SEC’s San Francisco regional office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer has raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. The complaint says that by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, it invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.

 


In Depth

High Time For A Cannabis Hedge Fund?

Sep 30 2014 | 7:07am ET

Launching a hedge fund is always a gamble, but Leslie Bocskor's decision to launch...

Lifestyle

Griffin Donates $1M To Rauner's Illinois Gov. Campaign

Sep 22 2014 | 9:29am ET

Hedge fund billionaire Kenneth Griffin definitely has a dog in this fight. The Citadel...

Guest Contributor

Appraisal Ratio Key To Evaluating Hedge Funds And Other New Investments

Sep 29 2014 | 3:07pm ET

As a former finance professor Peter Hecht experiences heartburn every time he hears...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…

 

Futures Magazine

September 2014 Cover

High frequency market making

High frequency trading is not evil, it is not a conspiracy and it really is not new; it is the natural evolution of the professional trading community making markets, providing liquidity and hopefully...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.