U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20488 / March 11, 2008
Securities and Exchange Commission v. Peter Krieger, Sheldon Krieger and John Madey, Case No. 05-80312-CIV-MIDDLEBROOKS/JOHNSON (S.D. Fla.)
Final Judgments of Permanent Injunction and Other Relief Entered Against Defendants Peter Krieger, Sheldon Krieger and John Madey
The Securities and Exchange Commission announced that on February 6, 2008, the United States District Court for the Southern District of Florida entered Final Judgments of Permanent Injunction and Other Relief against defendants Peter Krieger and Sheldon Krieger, and a Final Judgment of Disgorgement against defendant John Madey. The Final Judgments against the Kriegers, entered by consent, enjoin them from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Additionally, the Final Judgments dismiss the Commission's claims for disgorgement against Sheldon and Peter Krieger, who previously had paid investors signficant amounts of money in connection with other civil and criminal cases related to the same conduct. Finally, the Final Judgments order each of the Kriegers to pay a $110,000 civil penalty. The Final Judgment as to John Madey, also entered by consent, orders him to pay disgorgement of $223,094.90, prejudgment interest in the amount of $48,224.80 and waives the Commission's civil penalty claim against Madey.
The Commission commenced this action by filing its complaint on April 15, 2005, alleging defendants, Peter and Sheldon Krieger and Madey, as principals of a hedge fund called KFSI Equity Fund, L.P. ("KFSI Fund"), misappropriated approximately $3.7 million of the $7.5 million the KFSI Fund raised. The defendants raised money from approximately 45 investors by claiming the KFSI Fund would generate profits by trading in securities. The SEC's complaint also alleges in early 2000, the defendants began diverting money in the KFSI Fund to pay for the operations of Krieger Financial Services, Inc. ("Krieger Financial"), a broker-dealer the defendants controlled. The SEC's complaint claims the defendants concealed their misappropriation of funds and trading losses in the KFSI Fund by issuing false KFSI Fund account statements.
For additional information, see Litigation Release No. 19187 (April 15, 2005), Release No. 19338 (August 17, 2005).