Securities Law Prof Blog

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

Wednesday, February 4, 2009

SEC Charges Private Fund Manager with Misappropriation, Obtains Emergency Relief

The SEC filed an emergency enforcement action against Scott M. Ross, charging that Ross fraudulently obtained at least $10 million from approximately 300 investors. The SEC has obtained an emergency court order freezing Ross's assets and appointing a receiver from the federal district court in the Northern District of Illinois.

The SEC's complaint alleges that, beginning in 2007, Ross solicited investments in three purported private investment funds that Ross managed. Specifically, according to the complaint, Ross raised approximately $2 million from investors for the Elucido Fund LP ("Elucido"), telling investors that Elucido would invest in life settlement contracts. In connection with the second fund, the SEC alleges that Ross raised approximately $2 million from investors that was to be used to purchase stock in a company called Moondoggie Technologies. Finally, the complaint alleges that Ross raised between $6 million and $7 million for the Maize Fund LP, telling investors that their money would be pooled and invested in a Forex Account in which traders would engage in arbitrage currency trading.

The SEC complaint alleges that, in reality, Ross misappropriated approximately $2 million from Elucido and an undetermined sum in connection with the Moondoggie Technology stock purchases. Among other things, Ross used misappropriated funds to purchase a skybox at the Indianapolis Colts stadium, and pay purported returns to investors.

Ross consented to the emergency relief sought by the SEC, and the Honorable James B. Zagel, United States District Court, Northern District of Illinois, issued an order permanently enjoining Ross from further violations, freezing his assets and appointing a Receiver in the matter.

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