SEC Accuses North Carolina Hedge Fund Manager of Defrauding Investors

Oct 16 2015 | 10:47am ET

The Securities and Exchange Commission has charged a Charlotte, NC hedge fund manager with defrauding investors in three funds over several years.

According to the complaint, Lonny Scott Bernath directed three funds managed by his investment advisory firm, Headline Capital Management, to make loans to and investments in illiquid real estate and business ventures that he also managed and in which he had personally invested. 

The complaint also alleges Bernath misrepresented these investment activities, which took place between 2007 and 2011, did not disclose them until 2013, and periodically wrote down their value to the detriment of investors.

Bernath has agreed to partially settle the allegations against him, according to the SEC, without admitting or denying them. Bernath consented to a judgment, pending final court approval, ordering an accounting and barring him from violating several securities laws. Penalties and disgorgement, if any, will be determined at a later date.

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