SEC v. Haligiannis, et al., 04 CV 06488 (RJH) (S.D.N.Y.)
The Commission announced today that it filed an emergency enforcement action yesterday against Angelo Haligiannis and Sterling Watters Group LP (the "Fund"), a hedge fund, as well as the Fund's general partners, Sterling Watters Capital Advisors, LLC, and Sterling Watters Capital Management, Inc. (the "Defendants").
The complaint alleges that the Defendants have systematically been defrauding investors who purchased limited partnership interests in Sterling Watters. Since 1996, Haligiannis has raised at least $27 million in the Fund by grossly misrepresenting the Fund's performance to investors and potential investors. Haligiannis and Sterling Watters distributed to investors phony account statements that recorded fictitious quarterly and annual investment gains and account balances. Haligiannis and Sterling Watters also inflated Sterling Watters investment returns in marketing materials in an effort to induce investments in Sterling Watters. For example, Haligiannis provided investors marketing materials that falsely claimed that the Fund had $180 million in assets and had achieved returns of over 1,500 percent since inception. As recently as two weeks ago, Sterling Watters sent investors quarterly account statements that showed an aggregate of tens of millions of dollars of investor equity in the fund. In fact, the Fund's brokerage records show that the Fund has lost money over the years and is now essentially worthless.
The Complaint charges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder by all Defendants, and violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 by Haligiannis and the Fund's general partners.
Upon the Commission's application, the United States District Court for the Southern District of New York yesterday entered a temporary restraining order and an order freezing the Defendants' assets. The Court also ordered a verified accounting from all Defendants and expedited discovery. The litigation is pending.