U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20872 / January 28, 2009
Securities and Exchange Commission v. Lydia Capital, LLC et al., Civil Action No. 07-10712-RGS (D.Mass. April 12, 2007).
Securities and Exchange Commission v. Glenn Manterfield, Claim No. HQ08X00798 (High Court of Justice, Queen's Bench Division, Royal Courts of Justice, February 29, 2008).
United Kingdom Court of Appeal Upholds SEC Asset Freeze Order Against Defendant in SEC Case Alleging Fraud by a Hedge Fund Manager
The Securities and Exchange Commission (Commission) announced that on January 28, 2009, the Supreme Court of Judicature Court of Appeal in the United Kingdom dismissed the appeal of Glenn Manterfield, a citizen of the United Kingdom, of an order by a British court freezing Manterfield's assets. The High Court of Justice in London had previously issued the order freezing assets held in the United Kingdom by Manterfield on May 16, 2008. Manterfield is a defendant in a pending Commission enforcement action filed in April 2007 in the United States in which the Commission obtained emergency relief, including an asset freeze, against Manterfield and others for their roles in an alleged hedge fund fraud. Among other things, the Commission alleged that Manterfield misappropriated millions of dollars from hedge fund investors.
On February 29, 2008, the Commission filed a limited notice application with the High Court of Justice, Queen's Bench Division seeking an emergency order freezing approximately $1 million in assets held by Manterfield in the United Kingdom. The Commission filed the application after learning that a separate freeze order previously obtained by British authorities against Manterfield's assets might be lifted. After a hearing on the Commission's application on February 29, 2008, the High Court of Justice issued an order freezing the assets until March 6, 2008. Manterfield consented to continue the freeze until the court held an evidentiary hearing to determine whether the freeze should be extended. An evidentiary hearing was held in the High Court of Justice on April 30, 2008 and May 1, 2008. On May 16, 2008, the High Court of Justice issued an order continuing the freeze of Manterfield's assets until the resolution of the Commission's pending enforcement action in the United States. Manterfield appealed the order to the Supreme Court of Judicature Court of Appeal. On November 26, 2008, the Court of Appeal held a hearing and, on January 28, 2009, the three-judge panel unanimously dismissed Manterfield's appeal.
The Commission filed its U.S. enforcement action on April 12, 2007 in the U.S. District Court in Massachusetts against Manterfield, Evan Andersen, of Boston, Massachusetts, and Lydia Capital, LLC, a registered investment adviser based in Boston, Massachusetts. On April 12, 2007, the U.S. District Court issued a temporary restraining order that, among other things, froze the three defendants' assets. On May 3, 2007, following a hearing before the Court on May 2, 2007, the Court issued a consented-to preliminary injunction and ordered a continuation of an asset freeze of the defendants' assets. Andersen has settled the Commission's action against him, and the action is still pending against Manterfield and Lydia.
The Commission's Amended Complaint alleges that, between June 2006 and April 2007, Manterfield and Andersen, acting through Lydia, engaged in a scheme to defraud more than 60 investors, who invested approximately $34 million in Lydia Capital Alternative Investment Fund LP, a hedge fund managed by Lydia. The Amended Complaint alleges that defendants told investors that they intended to use the Fund's assets to acquire a portfolio of life insurance polices in the life settlement market. According to the Amended Complaint, Manterfield, Andersen, and Lydia made a series of material misrepresentations and omissions, including: (1) materially overstating, and in some instances completely fabricating the Fund's performance; (2) inventing business partners, offices, and investors in an attempt to legitimatize the firm and concealing the truth as to why key vendors and banks ceased relationships with the defendants; (3) lying about Manterfield's significant criminal history, and failing to disclose a February 2007 criminal asset freeze against Manterfield in England; (4) lying about how the Fund planned to address certain material risks and failing to disclose others; and (5) misstating the nature of the Fund's assets and its investment process. In addition, the Amended Complaint alleges that Manterfield and Andersen misappropriated millions of dollars of investors' funds by withdrawing investor monies to which they were not entitled.
The Commission acknowledges the assistance of the Financial Services Authority of the United Kingdom and the Securities Division of the Secretary of State of the Commonwealth of Massachusetts, which also filed an action against the parties on April 13, 2007.