U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19508 / December 21, 2005
Securities And Exchange Commission v. HMC International, LLC., et al., Civil Action No. 05 CV 10673 (DC) (S.D.N.Y.)
SEC Brings Emergency Action Against Hedge Fund, HMC International, LLC, and its Principals, Robert M. Massimi and Bret A. Grebow, to Halt Ongoing Fraudulent Hedge Fund
The Securities and Exchange Commission announced today that it filed an emergency enforcement action to halt an ongoing fraud orchestrated by Robert M. Massimi and Bret A. Grebow through a hedge fund, HMC International, LLC ("HMC" or the "Fund") (collectively, the "Defendants"). The Commission also charged Jaime Elliott, Massimi's wife, as a Relief Defendant.
The complaint alleges that from late 2001 to the present, Massimi, the Fund's manager, and Grebow, the Fund's trader, raised approximately $12.9 million from approximately 80 investors through a fraudulent offering of investments in HMC, and that Massimi and Grebow misappropriated more than $5.2 million of these investor funds for their own use. The Commission alleges that Massimi and Grebow materially misrepresented the Fund as a pooled investment vehicle that engaged in "low risk" day trading. Furthermore, Massimi and Grebow sent investors false monthly account statements that portrayed their investments as profitable when, in reality, Grebow was systematically looting the Fund's trading account and Massimi was continually benefiting from lucrative "profit" distributions and unauthorized expenses that he paid to himself and Grebow from new investor funds. Massimi also falsely assured investors that he was a hands-on manager, who maintained diligent oversight of the Fund's assets and trading. The Commission further alleges that, recently, as Massimi faced increasing investor concerns about the Fund's legitimacy and government inquiries into his misconduct, Massimi diverted assets to others, including the Relief Defendant, to shield them from investors and government authorities.
The complaint charges the Defendants with violating 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charges Massimi and Grebow with violating Sections 206(1) and 206(2) of the Investment Advisers Act, and, in the alternative, Grebow with aiding and abetting Massimi's violations of the Investment Advisers Act.
In its emergency enforcement action, the Commission is seeking, among other emergency relief, a temporary restraining order freezing the assets of the Defendants and certain assets of the Relief Defendant. In addition to this emergency relief, the Commission also seeks orders enjoining the Defendants, preliminarily and permanently, from committing future violations of the foregoing federal securities laws, and a final judgment ordering the Defendants and the Relief Defendant to disgorge ill-gotten gains and ordering the Defendants to pay civil penalties. [Securities and Exchange Commission v. HMC International, LLC., et al., 05 CV 10673 (DC) (S.D.N.Y., filed December 21, 2005)]