Securities Law Prof Blog

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

Thursday, March 19, 2009

SEC Sues Silicon Valley Hedge Fund Manager for Fraud

The SEC sued Albert K. Hu, a hedge fund manager with ties to Silicon Valley, for falsely claiming that his funds were overseen by experienced attorneys, auditors and other professionals, and for misappropriating investor funds. As part of its suit, the SEC is seeking an emergency court order freezing Hu’s assets. Yesterday, Hu, a long-time Bay Area resident, was arrested in Hong Kong on related criminal charges filed by the United States Attorney’s Office in San Jose.

Since 2001, as alleged in the Commission’s complaint, Hu claimed to manage hedge funds known as “Asenqua” and “Fireside.” The SEC alleges that Hu, and entities he controls, lied to investors from the beginning of his scheme. Hu and the Asenqua hedge funds falsely claimed that several prominent international law firms served as legal counsel for the Asenqua hedge funds. In addition, the defendants identified an individual as “Chief Financial Officer” of the Asenqua hedge funds, when in fact the person had no association with the funds. Hu forged the signature of the purported Chief Financial Officer in communications with investors, according to the complaint. Further, the defendants provided investors with supposedly independently audited financial statements for two of the funds. In reality, Hu paid for a virtual office with an address in the San Francisco financial district for the “independent” audit firm.

According to the Commission’s complaint, Hu raised more than $5 million from investors with connections to Silicon Valley and transferred hundreds of thousands of dollars of investor funds into foreign bank accounts without informing investors. The SEC further alleges that recently, Hu has refused investors’ requests for the return of their funds.

The Commission’s complaint charges Hu and the entities he controls, Asenqua, Inc.; Asenqua Capital Management, LLC; AQC Asset Management, Ltd.; and Fireside Capital Management, Ltd., with violating the antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, the SEC’s complaint charges Hu with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. In the action filed today, the Commission sought a temporary injunction against violations of the antifraud provisions, a temporary freeze of defendants’ assets, an accounting, and other relief.

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