U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19973 / January 19, 2007
SEC v. Angelo Haligiannis, et al., 04 Civ. 6488 (RJH) (S.D.N.Y.)
Commission Granted Summary Judgment in Hedge Fund Ponzi Scheme
On January 16, the Commission was awarded summary judgment against a hedge fund, Sterling Watters Group LP (the "Fund"), its general partners, Sterling Watters Capital Advisors, LLC, and Sterling Watters Capital Management, Inc., and these entities' principal, Angelo Haligiannis ("Haligiannis"). Judge Richard J. Holwell of the Southern District of New York found that, although the Fund had been losing money since at least 2000 and was virtually insolvent by the third quarter of 2003, the defendants distributed fraudulent offering materials, account statements, newsletters and marketing materials that materially misstated the Fund's returns and assets, including materials indicating that the Fund had $180 million in assets, at a time when, in fact, it had less than $170,000. The Court concluded that by early 2004, the Fund had effectively devolved into a "Ponzi" scheme. Haligiannis pled guilty to parallel criminal charges in September 2005, but failed to appear for his sentencing in January 2006, and currently remains a fugitive.
The Court granted the Commission's motion for permanent injunctions against violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act; and found the defendants jointly and severally liable for disgorgement of $15,635,862, plus prejudgment interest, and a civil penalty of $15,000,000.
For information about earlier developments in this matter, please see Litigation Release No. 18831 (August 12, 2004).