According to reports, the Securities and Exchange Commission (SEC) has charged a Miami-based hedge fund advisor for deceiving investors about whether the company’s executives had personally invested in a Latin America-focused hedge fund.
The SEC’s investigation found that Quantek Asset Management LLC executives lied about fund managers having “skin in the game” along with investors in the $1 billion Quantek Opportunity Fund. In fact, Quantek’s executives never invested their own money in the fund. The SEC also found that Quantek misled investors about the investment process of the funds it managed as well as certain related-party transactions involving its lead executive Javier Guerra, 41, from Miami, and its former parent company Bulltick Capital Markets.
According to the SEC, fund investors frequently inquired about the extent of the manager’s personal investment during their due diligence process, and many require it in fund selection. Quantek, particularly Quantek director of operations Ralph Patino, 46, of Miramar, Fla., misrepresented to investors from 2006 to 2008 that management had “skin in the game.” These misstatements were made when responding to specific questions posed in due diligence questionnaires that were used to market the funds to new investors. Quantek made similar misrepresentations in side letter agreements executed by Guerra with two sought-after institutional investors.
The SEC’s order also found that Quantek misled investors about certain related-party loans made by the fund to affiliates of Guerra and Bulltick. Because the fund permitted related-party transactions with Bulltick and other Quantek affiliates, investors were wary of deals that were not properly disclosed. In 2006 and 2007, Quantek caused the fund to make related-party loans to affiliates of Guerra and Bulltick that were not properly documented or secured at the outset, the SEC says.
Quantek and Bulltick employees later re-created the missing related-party loan documents, but misstated key terms of the loans and backdated the materials to give the appearance that the loans had been sufficiently documented and secured at all times, the SEC says, and Quantek and Guerra provided this misleading loan information to the fund’s investors.
Bulltick, Guerra and Patino are charged along with Quantek in the SEC’s enforcement action. They agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges, and Guerra and Patino agreed to securities industry bars.
Quantek, Guerra, Bulltick and Patino settled the charges without admitting or denying the findings. Quantek and Guerra agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively. In addition, Bulltick and Patino agreed to pay a penalties of $300,000 and $50,000, respectively. Guerra consented to a five-year securities industry bar, and Patino consented to a securities industry bar of one year. Quantek and Bulltick agreed to censures.
The foregoing information is provided by The White Law Group, a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida. For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.