SEC Charges Private Fund Adviser and Principal with Fraud
Aug. 16, 2022
File No. 3-20962
August 16, 2022 - The Securities and Exchange Commission today announced settled charges against Florida-based fund manager Gregory J. Blotnick and his advisory firm, Brattle Street Capital, LLC, for defrauding investors in a private fund they founded and controlled.
According to the SEC's order, Blotnick and Brattle Street solicited investors in the fund, BSC Opportunistic Equity, LP, with false and misleading statements, including misstatements about the profitability of the fund and the status of the fund's administrator. In addition, the order finds that Blotnick and Brattle Street engaged in trading that was inconsistent with the strategy described in the fund's private placement memorandum and resulted in losses of nearly all of the fund's assets, which Blotnick and Brattle Street hid through false account statements misrepresenting the fund's performance. Blotnick and Brattle Street also fraudulently obtained Paycheck Protection Program loans that they deposited in the fund's account and then lost through similar trading, according to the order. Moreover, the order finds that Blotnick and Brattle Street transferred $59,500 from the fund's account to Blotnick's personal account without proper authorization.
Blotnick subsequently pleaded guilty to fraud and money laundering charges in parallel federal and state criminal proceedings. Blotnick was sentenced to 51 months of imprisonment for the federal charges and to a concurrent term of one to three years for the state charges, and ordered to pay $4.7 million in restitution for the fraudulently obtained federal PPP loans.
The SEC's order finds that Blotnick and Brattle Street violated the antifraud provisions 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, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the SEC's findings, Blotnick and Brattle Street consented to a cease-and-desist order, a censure, and a collateral bar and investment company prohibition. In addition, Blotnick agreed to pay disgorgement and prejudgment interest.
The SEC's investigation was conducted by Marie DeBonis and Donna Norman and supervised by Corey Schuster, all of the Enforcement Division's Asset Management Unit. Maxwell Clarke and Judy Tran of the Division of Economic and Risk Analysis assisted with the investigation. The SEC appreciates the assistance of the Fraud Section of the U.S. Department of Justice's Criminal Division and the United States Attorney's Office for the District of New Jersey.