U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21563 / June 22, 2010
Securities and Exchange Commission v. ICP Asset Management, LLC, ICP Securities, LLC, Institutional Credit Partners, LLC, and Thomas C. Priore, Civil Action No. 10-CV-4791 (S.D.N.Y. June 21, 2010)
On June 21, 2010, the Securities and Exchange Commission filed a civil action in the United States District Court for the Southern District of New York charging the investment advisory firm ICP Asset Management, LLC ("ICP"), its founder, owner and, president, Thomas Priore, its affiliated broker-dealer, ICP Securities, LLC, and its holding company, Institutional Credit Partners, LLC, with fraudulently managing multi-billion-dollar collateralized debt obligations ("CDOs").
The complaint alleges that, in connection with its management of what were known as the Triaxx CDOs, ICP engaged in fraudulent practices and misrepresentations that caused the CDOs to lose tens of millions of dollars. Priore and his companies also improperly obtained tens of millions of dollars in advisory fees and undisclosed profits at the expense of their clients and investors. The SEC further alleges that ICP and Priore directed more than a billion dollars of trades for the Triaxx CDOs at what they knew were inflated prices. ICP and Priore repeatedly caused the Triaxx CDOs to overpay for securities in order to make money for ICP and protect other ICP clients from realizing losses. The prices for such trades often exceeded market prices by substantial margins. In some trades, ICP caused the CDOs to pay a price that was substantially higher than the price another ICP client paid for the security earlier the same day.
According to the SEC's complaint, ICP and Priore caused the CDOs to make numerous prohibited investments without obtaining necessary approvals, and they later misrepresented those investments to the trustee of the CDOs and to investors. The prices of many of these investments were intentionally inflated to allow ICP to collect millions of dollars in advisory fees from the CDOs. The SEC further alleges that ICP and Priore executed undisclosed cash transfers from a hedge fund they managed in order to allow another ICP client to meet the margin calls of one of its creditors. Priore subsequently misrepresented the transfers to the hedge fund's investors.
The complaint alleges that ICP, ICP Securities, Institutional Credit Partners, and Priore violated Section 17(a) of the Securities Act of 1933 (Securities Act) and directly violated and aided and abetted violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint further alleges that ICP and Priore directly violated and ICP Securities, Institutional Credit Partners, and Priore aided and abetted violations of Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-8 thereunder. The complaint alleges that ICP and Priore violated Section 206(3) of the Advisers Act. The complaint alleges that ICP violated Sections 204 and 206(4) of the Advisers Act, and Rules 204-2 and 206(4)-7 thereunder. The complaint further alleges that ICP Securities directly violated and ICP and Priore aided and abetted violations of Section 15(c)(1)(A) of the Exchange Act and Rule 10b-3 thereunder. Finally, the complaint alleges violations by Priore of Sections 10(b) and Section 15(c)(1)(A) of the Exchange Act and Rules 10b-3 and 10b-5 thereunder as a control person.
The SEC's complaint seeks a final judgment permanently enjoining the defendants from future violations of the federal securities laws and ordering them to pay civil penalties and disgorgement of ill-gotten gains plus prejudgment interest.
See Also: SEC Complaint