Haligiannis, et al.

SEC v. Haligiannis, et al., 04 CV 06488 (RJH) (S.D.N.Y.)

The Commission announced today the United States District Court for the Southern District of New York entered a preliminary injunction order (the "Order") against defendants Angelo Haligiannis; Sterling Watters Group LP (the "Fund"), a hedge fund; and the Fund's two general partners, Sterling Watters Capital Advisors, LLC, and Sterling Watters Capital Management, Inc. The Order continues the relief originally obtained on August 11, 2004 in response to the Commission's emergency enforcement action that sought a temporary restraining order, an order freezing assets, an accounting, the repatriation of assets, disgorgement and civil penalties, and other relief against the defendants. Pending resolution of the action, the Order enjoins the defendants from violating various provisions of the federal securities laws; freezes the defendants' assets; requires the defendants to submit accountings; allows for expedited discovery; prohibits the defendants from destroying documents and other evidence; and directs the defendants to repatriate assets.

The Commission alleges that the defendants have systematically been defrauding investors who purchased limited partnership interests in Sterling Watters. According to the Complaint, 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 the Fund distributed to investors phony account statements that recorded fictitious quarterly and annual investment gains and account balances. Haligiannis and the Fund also inflated the Fund's investment returns in marketing materials in an effort to induce investments in the Fund.

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. The litigation is pending.

See also: Litigation Release No. 18831 (August 12, 2004).