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In the Matter of Taberna Capital Management, LLC, et al. Admin. Proc. File No. 3-16776

Oct. 7, 2022

On September 2, 2015, the Commission instituted and simultaneously settled administrative and  cease-and-desist proceedings ("Order") against Taberna Capital Management, LLC ("Taberna"), Michael Fralin ("Fralin"), and Raphael Licht ("Licht") (collectively, the "Respondents").  The Commission found that, between 2009 and 2012, in connection with restructuring transactions undertaken between Taberna's collateralized debt obligation ("CDO") clients and the issuers of the underlying obligation in the Taberna CDO portfolios, Taberna retained over $15 million in certain fees ("Exchange Fees") that should have been paid to the CDOs.  The Commission further determined that the retention of Exchange Fees created actual and potential conflicts of interest that Taberna failed to disclose to its clients.  The Commission found that Fralin and Licht played key roles in the misconduct.  The Commission ordered, and Taberna has paid, a total of $15,000,000.00 in disgorgement and prejudgment interest into a fund for distribution (the "Disgorgement Fund").  The Order directs that the Disgorgement Fund be distributed pursuant to a distribution plan to the parties injured by the misconduct in the amounts necessary to compensate them for the harm they suffered.  Any remaining funds in the Disgorgement Fund after distribution are to be to be remitted to the United States Treasury. See the Commission's order: Release No. 34-75814.

On August 24, 2017, the Commission issued an order establishing a fair fund (“Fair Fund”) for the $21,6000,000.00 in disgorgement, prejudgment interest, and civil penalties paid by the Respondents for distribution to harmed investors. See the Commission’s order: Release No. 34-81477.

On November 20, 2017, the Commission issued an order appointing Rust Consulting, Inc., as the Fund Administrator to oversee the administration and distribution of the Fair Fund and, set the administrator’s bond amount. See the Commission’s Order: Release No. 34-82124.

On December 6, 2018, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provided the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-84725 and the Proposed Plan.

The Proposed Plan provides that the distribution of the Fair Fund shall be made to Taberna CDO clients who suffered losses caused by Taberna’s failure to distribute the Exchange Fees. Eligible Claimants will be identified through a claims process, as further described in the Proposed Plan.

Comments were received on the Proposed Plan during the 30-day comment period. On February 11, 2019, the Commission issued an order extending the time to enter an order approving or disapproving the plan of distribution to May 7, 2019 to allow for further evaluation and analysis to properly address the comments. See the Commission’s Order: Release No. 34-85092.

On May 2, 2019, the Commission issued an order approving a modified plan of distribution and simultaneously posted the approved modified plan of distribution (the “Modified Plan”). See the Commission’s Order: Release No. 34-85762 and the Modified Plan. Please note that there is a typographical error in one of the CUSIP numbers listed on Exhibit A. This error has been corrected and additional information that may be helpful to Investors has been added to the Harmed Securities List and Associated Information document.

Claim forms must be postmarked no later than September 12, 2019. 

On September 16, 2021, the Commission issued an order approving the disbursement of $9,568,027.98 from the Fair Fund for distribution to eligible investors. See the Commission’s Order: Release No. 34-93026.

On December 2, 2021, the Commission issued an order approving the disbursement of $3,949,907.74 from the Fair Fund to the Fair Fund’s escrow account at The Huntington National Bank, and for the Fund Administrator to distribute such monies, along with $5,718.32 held by the Tax Administrator and $432,752.55 at the Huntington National Bank, for a total distribution of $4,388,378.61 to 41 additional Eligible Claimants. See the Commission’s Order: Release No. 34-93704.

On April 27, 2023, the Commission issued an order authorizing the transfer to the U.S. Treasury of funds remaining in the Fair Fund and any funds returned to the Fair Fund in the future, discharging the fund administrator, and terminating the Fair Fund.  See the Commission’s Order: Release No. 34-97388.

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