U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20102 / May 3, 2007
SEC v. Lydia Capital, LLC et al., Civil Action No. 07-10712-RGS (D.Mass. April 12, 2007).
SEC Obtains Emergency Relief, Including an Asset Freeze, Against Massachusetts Hedge Fund Manager
Court Freezes at least $13 Million
The Securities and Exchange Commission (Commission) announced that today the U.S. District Court in Boston will issue a preliminary injunction order that, among other things, continues a freeze on the assets of a Boston-based hedge fund adviser and its principals. On April 12, 2007, the Commission filed an emergency action in the federal district court in Massachusetts against Lydia Capital, LLC, a registered investment adviser based in Boston, Massachusetts, and its two principals, Glenn Manterfield, of Sheffield, England and Evan Andersen, of Boston, Massachusetts. The Commission filed an Amended Complaint against all three defendants on May 1, 2007. The Commission's Amended Complaint alleges that, between June 2006 and April 2007, Manterfield and Andersen, acting through Lydia, engaged in a scheme to defraud more than 60 investors, who invested approximately $34 million in Lydia Capital Alternative Investment Fund LP (Fund), an unregistered hedge fund managed by Lydia.
The Amended Complaint alleges that defendants told investors that they intended to use the Fund's assets to acquire a portfolio of life insurance polices in the life settlement market. According to the Amended Complaint, while the Fund did acquire interests in some insurance polices, defendants materially misled investors about their operations and misappropriated at least $2 million of investor funds. According to the Amended Complaint, Manterfield, Andersen, and Lydia sold limited partnership interests and retained investors in the Fund through a series of material misrepresentations and omissions, including but not limited to: (1) materially overstating, and in some instances completing fabricating the Fund's performance; (2) inventing business partners, offices, and investors in an attempt to legitimatize the firm and concealing the truth as to why key vendors and banks ceased relationships with the Defendants; (3) lying about Manterfield's significant criminal history, and failing to disclose a February 2007 criminal asset freeze in England; (4) lying about how the Fund planned to address certain material risks and failing to disclose others; and (5) misstating the nature of the Fund's assets and its investment process. In addition to making serious material misrepresentations and omissions, the Amended Complaint alleges that Manterfield and Andersen misappropriated millions of dollars of investors' funds by withdrawing investor monies to which they were not entitled.
On April 12, 2007, in response to the Commission's request for emergency relief, the Court issued a temporary restraining order that, among other things, froze defendants' assets. On May 3, 2007, following a hearing before the Court on May 2, 2007, the Court issued a consented-to preliminary injunction and ordered a continuation of an asset freeze of the defendants' assets.
The Commission's Amended Complaint alleges that defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
The Commission acknowledges the assistance of the Securities Division of the Secretary of State of the Commonwealth of Massachusetts, which also filed an action against the parties on April 13, 2007.