SEC Charges Unregistered Broker for Selling $22 Million in Securities to Puerto Rico Government Entities

September 15, 2021/US SEC

On September 13, 2021, the Securities and Exchange Commission charged Eliseo Acosta, a resident of San Juan, Puerto Rico, with unlawfully selling securities of Kinetic Funds I, LLC (Kinetic Funds), a purported hedge fund managed by Kinetic Investment Group, LLC (Kinetic Group), an unregistered investment adviser, and its managing member, Michael Scott Williams. The SEC previously charged Kinetic Group and Williams with operating a fraudulent scheme and misappropriating millions of dollars from at least 30 investors located primarily in Florida and Puerto Rico.

The SEC’s complaint against Acosta, filed in the U.S. District Court for the District of Puerto Rico, alleges that Acosta solicited at least sixteen Puerto Rico government entities to invest in Kinetic Funds. As alleged, Acosta raised $22 million from the offer and sale of Kinetic Funds securities to two of the government entities, and received $105,300 in commissions for these investments. According to the complaint, at the time he solicited investors in Kinetic Funds, Acosta was not registered as a broker-dealer or associated with a registered broker-dealer.

The complaint charges Acosta with violating the broker-dealer registration provision of Section 15(a)(1) of the Securities Exchange Act of 1934. Acosta consented, without admitting or denying the allegations of the complaint, to entry of a civil court judgment permanently enjoining him from violating the charged provision and ordering him to pay disgorgement, prejudgment interest thereon, and a civil penalty in amounts to be determined by the court at a later date.

The SEC’s investigation was conducted by Barbara Viniegra and John T. Houchin in the Miami Regional Office and supervised by Eric R. Busto and Glenn S. Gordon. The SEC’s litigation is being led by Stephanie N. Moot and Barbara Viniegra and supervised by Andrew O. Schiff.

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