U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22545 / November 26, 2012
SEC v. Berton M. Hochfeld et al., Civil Action No. 12-CV-8202 (S.D.N.Y.)
Court Orders Asset Freeze and Appointment of a Receiver in SEC Action Charging Hedge Fund Adviser and Its Principal with Securities Fraud
The Securities and Exchange Commission announced today that the Honorable Paul G. Gardephe has entered consent judgments in its case against Berton M. Hochfeld and Hochfeld Capital Management, L.L.C., ordering injunctions, asset freezes, the appointment of a receiver, and other preliminary relief.
The SEC filed its civil action in the United States District Court for the Southern District of New York on November 9 to freeze the assets of Hochfeld and Hochfeld Capital, as well as the Heppelwhite Fund, LP, a hedge fund Hochfeld managed. The SEC’s action charged Hochfeld and his firm with securities fraud for misappropriating assets and making material misstatements to Heppelwhite Fund investors. The SEC also charged Hochfeld with violating a 2006 SEC Order barring him from associating with any broker, dealer, or investment adviser. Judge Gardephe entered the consent judgments on November 21.
In its complaint, the SEC alleges that since at least April 2011, Hochfeld has misappropriated assets from the Heppelwhite Fund, a hedge fund with approximately 25 investors and at least $6 million in assets. The SEC alleges that Hochfeld misappropriated approximately $1.3 million from the Fund, some of which he used to pay for a collection of valuable antiques he purchased. The SEC also alleges that Hochfeld and Hochfeld Capital made material misstatements to Fund investors, including providing them with periodic statements that overstated the value of their investments, and failing to disclose that Hochfeld is subject to the 2006 SEC Order that bars him from associating with any broker, dealer, or investment adviser.
Hochfeld and Hochfeld Capital consented to the Court’s judgments which: (i) permanently enjoin them from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933 and Sections 203 and 206 of the Investment Advisers Act of 1940; (ii) order them to provide a full accounting of all assets currently under their control; (iii) order an asset freeze as to Hochfeld, Hochfeld Capital, and the Heppelwhite Fund; (iv) order Hochfeld and Hochfeld Capital to disgorge ill-gotten gains and pay civil penalties in amounts to be determined; and (v) order the appointment a receiver over the Heppelwhite Fund and Hochfeld Capital.
Additionally, in a parallel criminal action announced November 9, 2012, by the U.S. Attorney’s Office for the Southern District of New York, Hochfeld was arrested and charged with securities fraud and wire fraud.
The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in this matter.
The SEC’s investigation is continuing.