Former CFO of Investment Adviser To Pay $227,500 Penalty to Settle Fraud Case

May 25, 2018/US SEC

On May 4, 2018, the Honorable Robert W. Sweet of the U.S. District Court for the Southern District of New York entered a final judgment, on consent, against defendant Perry A. Gruss, the former chief financial officer of D.B. Zwirn & Co., L.P. (DBZCO), a now defunct investment adviser, permanently enjoining Gruss from violations of Section 206(2) of the Investment Advisers Act of 1940 and imposing a civil money penalty of $227,500.

The SEC’s complaint, filed in April 2011, alleged, among other things, that Gruss aided and abetted DBZCO’s improper transfers of monies between its privately managed client funds, including transfers of $576 million to allow one of the client funds to make its investments, and transfers of $273 million to allow the same client fund to repay its revolving credit facility.

By order dated March 28, 2017, the court granted, in part, the SEC’s motion for summary judgment and held that Gruss aided and abetted DBZCO’s violations of Section 206(2) of the Advisers Act resulting from the improper transfers of monies between the client funds for investments and repayment of the revolving credit facility. The court also granted the motion for the imposition of civil penalties in the amount of $227,500. The final judgment entered on May 4 makes these findings final and, as part of the settlement, the court granted the SEC’s request to voluntarily dismiss, with prejudice, all additional claims against Gruss.

Separately, the SEC instituted settled administrative proceedings against Gruss in which Gruss acknowledges the district court’s finding that Gruss aided and abetted violations of Section 206(2) of the Advisers Act, and consents to a Commission order that he be barred from association with any investment adviser with the right to apply for reentry after three years.

For further information, see LR-21923 (April 8, 2011)

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