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U.S. Securities and Exchange Commission


Litigation Release No. 19956 / January 4, 2007

SEC v. Joseph J. Spiegel, Civil Action No. 1:07CV00008 (RCL) (D.D.C.)

SEC Files Fraud Charges Against Former Hedge Fund Portfolio Manager Joseph J. Spiegel for Engaging in Illegal “Pipe” Trading Scheme

The Securities and Exchange Commission filed securities fraud and related charges today against Joseph J. Spiegel, a former portfolio manager for Spinner Global Technology Fund, Ltd. (“SGTF”), a New York-based hedge fund, in the U.S. District Court for the District of Columbia. Spiegel, without admitting or denying the allegations in the Commission’s complaint, agreed to settle charges that he engaged in an unlawful trading scheme on SGTF’s behalf in violation of the antifraud and registration provisions of the federal securities laws in connection with three “PIPE” (Private Investment in Public Equity) offerings. As detailed below, Spiegel agreed to entry of a final judgment imposing an injunction and a $110,000 civil penalty. He also agreed to the issuance of an administrative order imposing a three-year bar from association with an investment advisor.

The Commission’s complaint alleges, among other things, that:

  • Spiegel, after agreeing to invest in three PIPE transactions, sold short the issuer’s stock through “naked” short sales in Canada. 
  • Once the Commission declared the resale registration statement effective, Spiegel used SGTF’s PIPE shares to close out some or all of the pre-effective date short positions, a practice Spiegel knew, or was reckless in not knowing, was prohibited by the registration provisions of the Securities Act of 1933. To avoid detection and regulatory scrutiny, Spiegel employed wash sales and matched orders to make it appear that he was covering SGTF’s pre-effective date short positions with open market stock purchases when, in fact, the covering transactions were not done with open market shares because the hedge fund was on both sides of the trades and covered the short positions with its PIPE shares. Spiegel’s illegal trading resulted in ill-gotten gains for SGTF. 
  • In each of the transactions, Spiegel, on behalf of SGTF, also made materially false representations to the PIPE issuers to induce them to sell securities to SGTF. As a precondition of participation in a PIPE, SGTF had to represent that it would not sell, transfer or dispose of the PIPE shares other than in compliance with the registration provisions of the Securities Act. This representation was material to the PIPE issuers, who, as the securities purchase agreements made clear, relied on the investors’ representations in order to qualify for an exemption from the registration requirements for their private offering. However, at the time Spiegel signed the securities purchase agreements on behalf of the hedge fund, he intended to distribute the restricted PIPE securities in violation of the registration provisions of the Securities Act.

Spiegel consented to the entry of a final judgment permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 5 of the Securities Act of 1933. In addition, the final judgment orders Spiegel to pay a $110,000 civil penalty. Finally, Spiegel consented to the issuance of a Commission order, pursuant to Section 203(f) of the Investment Advisers Act of 1940, barring him from association with an investment adviser with the right to reapply after three years.

The Commission acknowledges the assistance of the Investment Dealers Association of Canada. The Commission previously instituted proceedings against SGTF and Spinner Asset Management, LLC. See Administrative Proceeding No. 33-8763 (December 20, 2006).

SEC Complaint in this matter



Modified: 01/04/2007