U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19807 / August 17, 2006
SEC v. Mark R. Conway, 06-CR-10236-PBS (D. Mass.)
Massachusetts Hedge Fund Adviser Charged With Mail and Wire Fraud
The Securities and Exchange Commission announced today that, on August 7, 2006, Mark R. Conway, of Waltham, Massachusetts, was charged in an Information with thirteen counts of mail and wire fraud by the U.S. Attorney for the District of Massachusetts.
The Information alleges that, from approximately January 2001 to October 2005, Conway acted as the managing partner of Groundswell Partners LLC, the General Partner and management company for Groundswell Capital LP, a quantitative systematic hedge fund doing business in Massachusetts. According to the Information, as managing partner, Conway made numerous misrepresentations to investors, including that the hedge fund would follow a specific investment strategy devised in part by Conway. The Information alleges that, in fact, Conway, the sole trader for the fund, ceased using the promised investment strategy without notice to, or the approval of, the investors. In addition, according to the Information, in order to hide this deviation from the promised strategy, Conway created and distributed false documentation for the purpose of inducing investors to transmit additional investment monies, concealing the true status of the hedge fund account and its trading history, and causing existing investors to leave their funds under Conway's management. Conway received a fee for his management of the investment funds. If convicted, Conway faces up to 20 years in prison, to be followed by 3 years of supervised release and a $250,000 fine.
Previously, on November 4, 2005, the Commission filed an enforcement action and obtained emergency relief (including an asset freeze) against Conway and Groundswell Partners based on conduct similar to that in the criminal Information referred to above.
On June 30, 2006, the Commission obtained default judgments against Groundswell Partners and Groundswell Capital, a relief defendant. The Commission is continuing to litigate its action against Conway.