U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21372 / January 11, 2010
Securities and Exchange Commission v. Neil V. Moody and Christopher D. Moody (U.S. District Court for the Middle District of Florida, Civil Action No. 8:10-CV-0053-T-33TBM)
The Securities and Exchange Commission today filed securities fraud charges against two Sarasota, Florida investment advisers for their roles relating to a large-scale hedge fund fraud perpetrated by Arthur G. Nadel.
The SEC alleges that Neil V. Moody and his son, Christopher D. Moody, distributed materials to investors that overstated the historical returns and asset values of three hedge funds they managed and controlled: Valhalla Investment Partners, L.P.; Viking IRA Fund, LLC; and Viking Fund, LLC (the "Moody Funds"). Under an arrangement the Moodys had with him, Arthur Nadel provided all of the investment advice to the Moodys' three hedge funds.
According to the SEC's complaint, filed in federal court in Tampa, Florida, from at least 2003 through December 2008, Neil and Christopher Moody disseminated to investors and prospective investors offering materials, account statements, and newsletters that misrepresented the Moody Funds' historical investment returns and overstated their asset values by as much as $160 million. The Moodys made these representations to investors based on grossly overstated performance numbers that Nadel created and provided to them. The Moodys failed to independently verify the accuracy of the performance figures they received from Nadel and relied exclusively on Nadel's information despite multiple red flags that should have caused them to question his figures.
The complaint also alleges that the Moodys misled investors regarding their role in managing the assets of the Moody Funds by claiming that they controlled all of the investment and trading decisions. In truth, Nadel controlled nearly all of the Moody Funds' investment and trading activities with no meaningful supervision or oversight by the Moodys.
The SEC has charged the Moodys with securities fraud and seeks permanent injunctions, disgorgement of illegal gains and financial penalties. Without admitting or denying the SEC's allegations, the Moodys have consented to permanent injunctions against future securities fraud violations. The Moodys also consented to the entry of a Commission order that will bar them for five years from associating with any investment adviser.