Securities Law Prof Blog

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

Tuesday, November 10, 2009

SEC Charges Former Hedge Fund CFO with Securities Fraud

The SEC charged Ezra C. Levy, the former chief financial officer of New York-based hedge fund Boston Provident LP, with securities fraud for arranging secret sales of securities from his personal trading account to the hedge fund accounts at inflated prices to generate his own illicit profits.  According to the SEC's complaint, Levy's job responsibilities required that he have access to the firm's electronic trade entry system. He did not, however, have the authority to make trading decisions for Boston Provident's accounts, and was merely authorized to execute the trading decisions of the firm's chief executive officer. The SEC alleges that Levy made unauthorized, fraudulent trades that resulted in financial losses to the hedge fund accounts while he made a personal profit of more than a half-million dollars. The SEC is seeking a court order to freeze Levy's assets.

The SEC alleges that on two days in June 2009, Levy secretly entered "sell" orders for securities at above-market prices for his personal account. At approximately the same time, he entered "buy" orders for Boston Provident's accounts, for the same securities at the same above-market prices. By placing these matched orders, Levy caused sales of securities from his personal account to Boston Provident's accounts at inflated prices. Levy's profit from these fraudulent trades exceeded $537,000.

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