SEC Revokes Registration of Adviser Engaged in $60 Million Fraud

November 26, 2019/US SEC

The Securities and Exchange Commission today revoked the registration of New York-based investment adviser International Investment Group LLC (IIG), which the Commission recently charged with securities fraud for hiding losses in its flagship hedge fund and selling at least $60 million in fake loan assets to clients.

The SEC’s complaint, filed on Nov. 21, 2019, in federal court in New York, alleges that IIG grossly overstated the value of defaulted loans in the fund’s portfolio to conceal losses in its flagship hedge fund. In an effort to continue its deception, IIG allegedly doctored the firm’s records to show that the defaulted loans had been repaid and that the proceeds had been used to make new loans, when in fact there had been no repayment and the purported new loans were fake. The SEC’s complaint further alleges that IIG sought to raise money to meet investor redemption requests and other liabilities by selling at least $60 million in fake trade finance loans to other clients. To deceive clients into purchasing these loans, an IIG employee allegedly had fake documentation created to substantiate the non-existent loans, including fake promissory notes and a forged credit agreement.

“This case shows that even sophisticated professional investors can fall victim to Ponzi schemes,” said Daniel Michael, Chief of the SEC’s Complex Financial Instruments Unit. “The revocation of IIG’s registration is necessary to protect the public in light of IIG’s egregious breaches of its fiduciary duty as an investment adviser.”

IIG consented to a bifurcated settlement under which it is enjoined from future violations of the antifraud provisions of the federal securities laws. The judgment, which the court entered on Nov. 26, 2019, also imposes a preliminary asset freeze, but reserves the issue of any monetary relief, including disgorgement, prejudgment interest, and civil penalties, for further determination by the court upon motion of the SEC.

The SEC’s ongoing investigation is being conducted by Philip A. Fortino and Osman Nawaz of the Complex Financial Instruments Unit and Lindsay Moilanen and Sheldon L. Pollock of the New York Regional Office, with assistance from Eli Bass of the Office of Compliance Inspections and Examinations, and is being supervised by Mr. Michael and Sanjay Wadhwa. The SEC’s litigation will be handled by Lee A. Greenwood, Mr. Fortino, and Ms. Moilanen.

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