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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, February 10, 2009

SEC Charges Hedge Fund Managers with Fraud

The SEC filed a civil injunctive action in the United States District Court for the Southern District of New York charging Grant Ivan Grieve, Finvest Asset Management, LLC ("FAM") and Finvest Fund Management, LLC ("FFM") with fraud in connection with two hedge funds that they managed and advised, Finvest Primer, L.P. ("Primer Fund") and Finvest Yankee, L.P ("Yankee Fund"). The Commission's complaint alleges that, in an effort to attract and retain investors in Primer Fund and Yankee Fund, the defendants took elaborate steps to create the impression of profitable performance that they had not actually achieved.  Specifically, the Commission's complaint alleges that, beginning at least as early as mid-2006, defendants Grieve and FAM fabricated and disseminated financial information for the Primer Fund that was "certified" by two sham professional firms that Grieve himself created: a supposedly independent back-office administrator called Global Hedge Fund Services ("GHFS"); and a purportedly independent accounting firm called Kass Roland, LLC ("Kass Roland"). The complaint further alleges that Grieve and FAM sent certain investors a fabricated confirmation by GHFS of Primer Fund's trading operations for fiscal years 2001 through 2005, and sent at least one prospective investor financial statements containing a fake Kass Roland audit opinion. According to the complaint, Grieve had secretly formed GHFS and Kass Roland — each with fictitious employees, phone numbers, websites, email addresses, automated voice messaging systems, and physical office addresses — as part of an overall effort to deceive current and prospective investors about his investing capabilities and track record.

The Commission's complaint also alleges that Grieve, FAM, and FFM provided current and prospective investors in both Primer Fund and Yankee Fund with monthly account statements, newsletters, and "fact sheets" that materially overstated the funds' performance and assets. The complaint further alleges that, beginning in late 2008, Grieve has been engaging in similar misconduct overseas, including luring new investors and/or placating existing European investors with newly-fabricated documents.

The complaint seeks permanent injunctions, disgorgement and prejudgment interest thereon, and civil money penalties against all of the defendants.

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