Litigation Release No. 18362 / September 25, 2003
Securities and Exchange Commission v. Millennium Capital Hedge Fund, L.P., Millennium Capital Group, LLC, and Andreas F. Zybell (Case No. CV-03-1862-PHX-FJM)(D. Ariz.)
SEC Halts Ongoing Hedge Fund Fraud
The Securities and Exchange Commission ("Commission") announced that on September 25, 2003, the Hon. Frederick J. Martone, United States District Judge for the District of Arizona, issued a temporary restraining order halting an ongoing fraudulent scheme to sell unregistered interests in a hedge fund called Millennium Capital Hedge Fund, L.P. ("Millennium") of Gilbert, Arizona. In addition to Millennium, the Commission's complaint also charges two investment advisers: Millennium Capital Group, LLC ("MLLC") of Gilbert, Arizona, and Andreas F. Zybell, age 48, of Homosassa Springs, Florida.
The complaint alleges that Millennium seeks to raise $5 million through the sale of limited partnership interests. As alleged in the complaint, the defendants have raised at least $1.4 million, including $697,000 since June 30, 2003, from investors in Arizona, California, Illinois, Iowa, New Mexico, Pennsylvania, and Utah. The complaint also alleges that the defendants represent that MLLC and Zybell would use investor funds to trade securities for Millennium, including publicly traded stocks and options. The complaint further alleges that the defendants falsely represent to investors that Millennium achieved a 46% return for the twelve months ended June 30, 2003, when, in fact, Millennium had substantially lower returns of less than 14%. Finally, the complaint alleges that the defendants fail to disclose to investors that the Nevada Secretary of State revoked Millennium's limited partnership status on June 1, 2003, thereby prohibiting Millennium from conducting operations as a limited partnership.
The Court granted the Commission's applications for a temporary restraining order; granted expedited discovery; and issued orders freezing the assets of Millennium's brokerage account and prohibiting the destruction of documents by the defendants. The temporary restraining order bars Millennium, MLLC, and Zybell from committing securities fraud in violation of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court's order also bars MLLC and Zybell from committing securities fraud in violation of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Furthermore, the Court's order bars each of the defendants from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The Court's order also bars Millennium from violating the investment company registration provision of Section 7(a) of the Investment Company Act of 1940. A hearing on whether a preliminary injunction and other relief should be issued against the defendants is scheduled for November 14, 2003.
In addition to the interim relief granted on September 25, 2003, the Commission seeks a final judgment against all the defendants, enjoining them from future violations of the securities registration and antifraud provisions of the federal securities laws, enjoining Millennium from violating the investment company registration provisions, ordering defendants to disgorge all ill-gotten gains plus interest, and assessing civil penalties against them.
This case is the product of an investigation by the Securities and Exchange Commission, the Arizona Attorney General's Office, and the Arizona Corporation Commission.
