U.S. Securities and Exchange Commission
Litigation Release No. 18214 / July 3, 2003
Securities and Exchange Commission v. Peter W. Chabot, Chabot Investments, Inc., Sirens Investments, Inc., Sirens Synergy, The Synergy Fund, LLC, Civil Action No. 1:01CV09976 (S.D.N.Y.) (filed November 13, 2001).
Court Enters Judgment against Peter W. Chabot for Securities Fraud
On June 25, 2003, the Honorable Naomi R. Buchwald, United States District Court Judge for the Southern District of New York, entered a Judgment against Peter W. Chabot ("Chabot") and Chabot Investments, Inc. for violating the antifraud provisions of the federal securities laws. In its Complaint filed on November 13, 2001, the Commission alleged that, beginning in 1999, Chabot, individually and through his entities, raised over $1.2 million from 14 investors by making material misrepresentations and omissions to them concerning an alleged hedge fund. Chabot falsely claimed he was an experienced trader and that he had developed a mathematical model to predict when to buy stocks and whether to take long or short positions. Chabot also prepared false and misleading account statements for the investors, claiming large returns on the purported investments made by the alleged hedge fund.
As alleged in the Commission's Complaint, Chabot did not buy stocks or other securities with the investors' funds. Instead, he used their money for his personal expenses. On January 8, 2002, Chabot pled guilty to one count of securities fraud and one count of wire fraud before the United States District Court for the Southern District of New York, in United States v. Peter W. Chabot, Case No. 02 Cr 19. On February 27, 2002, Chabot was sentenced to 27 months imprisonment, supervised release of 36 months, and ordered to pay restitution of $1,265,868.
Chabot and Chabot Investments, Inc., without admitting or denying any of the allegations of the Commission's Complaint, consented to entry of the final judgment, which permanently enjoined 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 206(1) and (2) of the Investment Advisers Act of 1940. The final judgment also provided that any remaining assets and funds in Chabot Investment Inc.'s bank accounts be applied in partial satisfaction of the February 27, 2002 order in the criminal action, which ordered Chabot to pay restitution to his victims. In addition, on June 27, 2003, the court entered a Notice of Voluntary Dismissal against defendants, The Synergy Fund LLC, Sirens Investments, Inc., and Sirens Synergy. The Commission moved to dismiss its claims against these defendants because, although referenced in documents prepared by Chabot, they were later determined not to exist.
On July 3, 2003, based on the entry of the final judgment against Chabot, the Commission also instituted settled administrative proceedings against him pursuant to Section 203(f) of the Investment Advisers Act of 1940. Without admitting or denying the Commission's findings, Chabot consented to the entry of the Commission's Order, which permanently bars him from associating with any investment adviser. In the Matter of Peter W. Chabot, Administrative Proceeding File No. 3-11170;); Investment Advisers Act of 1940 Release No. 2142 (July 3, 2003).