The Securities and Exchange Commission (SEC) has filed an emergency action charging a Cayman Islands-registered offshore fund and two individuals with engaging in a fraudulent scheme.
It also obtained an asset freeze to safeguard remaining investor funds at risk of immediate dissipation.
The SEC complaint alleges that, from around 2018 onwards, Ofer Abarbanel and Victor Chilelli “engaged in a scheme to defraud investors in an offshore mutual fund they controlled, the Income Collecting 1-3 Months T-Bills Mutual Fund”.
The US regulator has accused Abarbanel, Chilelli, and the fund of “violating the antifraud provisions of the federal securities laws” and it is seeking “permanent injunctions, disgorgement with prejudgment interest, civil penalties, and permanent bars against participating in future securities offerings”.
Details
According to the SEC complaint, Abarbanel told investors that “the fund would invest primarily in US Treasury securities and also enter into certain types of reverse repurchase agreements with US Treasury securities serving as collateral”.
However, it “invested only minimally in US Treasuries, and did not enter into any reverse repurchase agreements along the lines described in offering documents”.
“Instead, the complaint alleges, the fund routed nearly all investor funds to shell companies under the defendants’ control as part of uncollateralised sham lending arrangements with the fund,” the SEC added.
“When investors sought to redeem $106m (£76.4m, €89.2m) in investments last month, the defendants refused and instead took steps to transfer funds to an account from which no redemptions could be drawn.”
It is not clear how much money was invested in the fund.
Carolyn Welshhans, associate director in the SEC’s division of enforcement, said: “As this emergency action shows, the SEC will move quickly to protect investor funds from potential dissipation and misappropriation.
“We can detect misconduct and enforce the securities laws even where, as we allege happened here, fraudsters transfer and divert funds to shell companies.”
