WASHINGTON, D.C. -- The Securities and Exchange Commission today told a federal court that $230 million held in an offshore account by a hedge fund has been returned to the U.S. and will remain frozen pending completion of the SECís Ponzi scheme lawsuit against the fundís adviser and its principal.
In a filing in the U.S. District Court for the District of Connecticut, the SEC said the money was returned as a result of the court order obtained by the SEC in its case against Francisco Illarramendi of Connecticut and his firm Highview Point Partners LLC, which managed three hedge funds.
ďWeíre pleased with the return of this money to the U.S. and believe it will help preserve these assets for the benefit of defrauded investors,Ē said David P. Bergers, Director of the SECís Boston Regional Office.
Ethiopis Tafara, Director of the SECís Office of International Affairs, added, ďIn this case, the ability to freeze and repatriate the alleged financial crime proceeds was critical to the SECís effective enforcement of the U.S. securities laws.Ē
The SEC charged Illarramendi and his unregistered investment advisory firm MK Capital Management in January with running a multi-year, multi-million dollar Ponzi scheme. Stamford, Conn.-based Highview was added as a defendant in May. Three hedge funds managed by Highview and several entities affiliated with MK Capital Management were named as relief defendants for allegedly holding funds tainted by the Ponzi scheme.
After an evidentiary hearing, the Honorable Janet Bond Arterton, U.S. District Judge for the District of Connecticut, entered an order on June 16 freezing the assets of three hedge funds and ordering that all assets of the funds, including $230 million held in an offshore account, be immediately returned to the U.S.
Judge Arterton had previously frozen the assets of Illarramendi, Highview, MK Capital Management, and several affiliated entities.
In its filing today, the SEC informed the court that the $230 million was received last week and is being held in a bank within the U.S.
The SEC charges Illarramendi, Highview, and Michael Kenwood Capital Management with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and also charges Highview with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The following entities are named as relief defendants, alleging that they received investor funds to which they have no right: Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., and Highview Point LP, Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP. In addition to preliminary emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties from the defendants, and disgorgement plus interest from the relief defendants.
Illarramendi, Juan Carlos Horna Napolitano, 40, a Venezuelan citizen residing in Pembroke Pines, Florida, and Juan Carlos Guillen Zerpa -- the head of interna
tional consulting firm BDO's accounting firm in Venezuela -- have all pleaded guilty in relation to the ponzi scheme. In exchange for at least $3 million, Horna and Zerpa assisted Illarramendi in creating a fictitious asset verification letter for $275 million and misleading and deceiving investors and the SEC into believing that there was adequate capital and credit in the funds.
Last year, the SEC returned more than $2.2 billion to harmed investors through financial recoveries in SEC enforcement actions.
Carlos J. Costa-Rodrigues, Sofia T. Hussain, Michelle Perillo, and LeeAnn Ghazil Gaunt of the SECís Boston Regional Office conducted the investigation following an examination conducted by Zerubbabel Johnson, Stephen M. Latin, Michael D. OíConnell, and Elizabeth Salini. Timothy Geishecker of the SECís Office of International Affairs assisted with the investigation. The SECís litigation effort is being led by Rua M. Kelly and Kathleen B. Shields. The SECís investigation is ongoing.3/7/2011 US Charges Venezuela PDVSA Pension Fund Manager with Running Ponzi Scheme
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