U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19838 / September 19, 2006
Securities and Exchange Commission v. Seaforth Meridian, Ltd., et al., Civil Action No. 06-4107-RDR (D. Kan. Sept. 14, 2006).
Court Orders Asset Freeze and Other Emergency Relief Against Hegde Fund Seaforth Meridian, Ltd. and Its Principals
On September 14, 2006, the United States District Court for the District of Kansas (Topeka Division) issued an order (Order) granting, as against the defendants and relief defendants named in the Commission's complaint, the Commission's emergency requests for an asset freeze, an order expediting discovery and preventing the destruction of documents, and the appointment of a receiver in the civil injunctive action the Commission filed with the Court on September 14, 2006. The defendants are Alain A. Assemi, Timothy J. Clyman, John D. Friedrich, Scott F. Klion (a/k/a James Tucker and David Tanner), and the three entities they controlled and operated: Seaforth Meridian, Ltd. (Seaforth Meridian); Seaforth Meridian Management, LLC; and Seaforth Meridian Advisors, LLC. The relief defendants are Henri B. Gonthier and Frederick L. Winkler. In addition, the Court granted in the Order the Commission's request, as against the defendants, for the repatriation of any offshore funds.
The Commission alleges in its complaint that from as early as March 2004 through at least October 2005, Assemi, Clyman, Friedrich, and Klion (collectively, the Seaforth Principals) fraudulently raised approximately $18 million from nearly 70 - mostly elderly - investors located in several states. The Seaforth Principals enticed investors to purchase limited partnership interests in Seaforth Meridian with offering materials and oral representations that falsely represented and omitted material information regarding investment strategies and risk of loss, the financial controls over investor funds, and the background, experience, and expertise of the Seaforth Principals. Specifically, the Commission alleges that the Seaforth Principals misled investors about the supposed conservative nature of the Seaforth Meridian investment strategy while, in fact, sending almost 75% of the funds raised to two highly suspect, offshore funds. The Commission also alleges that the Seaforth Principals funneled more than $600,000 to themselves without having adequately accounted for Seaforth Meridian's profits or losses. Further, the Seaforth Principals lulled investors with false monthly account statements and reports that emphasized the safety of the investor funds.
The Commission alleges in its complaint that the defendants violated the antifraud provisions of the federal securities laws, specifically, 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.
The Commission also seeks in its complaint preliminary and permanent injunctions against future violations; disgorgement of ill-gotten gains plus prejudgment interest; and the imposition of civil penalties. The Court scheduled a hearing on September 26, 2006, to determine whether to issue a preliminary injunction.
The Commission thanks the Financial Services Authority of the United Kingdom for its assistance in this matter.