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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 22086 / September 8, 2011

Securities and Exchange Commission v. EagleEye Asset Management, LLC and Jeffrey A. Liskov (United States District Court for the District of Massachusetts, Civil Action No. 11-CV-11576)

Commission Sues Massachusetts Investment Adviser For Fraudulently Inducing Clients to Invest in Forex, Causing Investor Losses of Nearly $4 Million While Adviser Earned Hefty Fees

The Securities and Exchange Commission announced that, on September 8, 2011, it filed a civil injunctive action in federal district court in Massachusetts against registered investment adviser EagleEye Asset Management, LLC, and its sole principal, Jeffrey A. Liskov, both of Plymouth, MA, in connection their fraudulent conduct toward advisory clients.

In its complaint, the Commission alleges that, between at least April 2008 and August 2010, Liskov made material misrepresentations to nearly a dozen advisory clients to induce them to liquidate investments in securities and instead invest the proceeds in foreign currency exchange (“forex”) trading. These investments, which were not suitable for older clients with conservative investment goals, resulted in steep losses for clients, totaling nearly $4 million, but EagleEye and Liskov came away with over $300,000 in performance fees on these investments alone, in addition to other management fees they collected from clients. Liskov’s strategy was to generate temporary profits on client forex investments to enable him to collect performance fees, after which client investments invariably would sharply decline in value. According to the Commission’s complaint, Liskov’s material misrepresentations to clients concerned the nature of forex investments, the risks involved, and his expertise and track record in forex trading. As to some clients, Liskov did not explain what forex trading was at all. As to other clients, Liskov downplayed the risks of forex investments. Liskov also falsely told several clients that he had had prior success in forex trading, when in fact he had lost substantial sums of his own or other clients’ money in forex trading when he made such statements. The Commission’s complaint further alleges that, in the case of two clients, without their knowledge or consent, Liskov liquidated securities in their brokerage accounts and transferred the proceeds to their forex trading accounts where he lost nearly all client funds, but not before first collecting performance fees for EagleEye (and ultimately himself) on short-lived profits in the clients’ forex accounts. The complaint alleges that Liskov accomplished the unauthorized transfers by doctoring asset transfer forms. On several occasions, Liskov took old forms signed by the clients and used “white out” correction fluid to change dates, asset transfer amounts, and other data. Liskov also used similar tactics to open multiple forex trading accounts in the name of one client, thereby maximizing his ability to earn performance fees for EagleEye (and ultimately himself) on the client’s investments, all without disclosing this to the client or obtaining the client’s consent.

The Commission’s complaint alleges that, by the foregoing conduct, EagleEye and Liskov violated 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 further alleges that EagleEye failed to maintain certain books and records required of investment advisers in violation of Section 204 of the Advisers Act and Rule 204-2(a) thereunder, and that Liskov aided and abetted EagleEye’s violations of these provisions. The Commission seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest thereon, and the imposition of a monetary penalty against both EagleEye and Liskov.

The Commission acknowledges the assistance of the Commodity Futures Trading Commission and Secretary of the Commonwealth of Massachusetts William F. Galvin, both of whom today filed related cases.

 

http://www.sec.gov/litigation/litreleases/2011/lr22086.htm


Modified: 09/08/2011