U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23034 / June 30, 2014
Securities and Exchange Commission v. OM Investment Management LLC et al., Civil Action No. 13-cv-23486-MARTINEZ/MCALILEY
District Court Enters Final Judgment Setting Disgorgement and Civil Penalties Against Hedge Fund Advisers Om Investment Management and Gignesh Movalia for Fabricating Statements of Shares in Facebook, Inc. and Making Unauthorized and Undisclosed Investments
The Commission announced that on May 29, 2014, the United States District Court for the Southern District of Florida entered a Final Judgment setting disgorgement in the amount of $1,729,800.04 against Defendants OM Investment Management LLC ("OMIM") and Gignesh Movalia, jointly and severally, and a civil penalty in the amount of $300,000 against Movalia, pursuant to Section 20(d) of the Securities Act of 1933 ("Securities Act"); Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act"); Section 209(e) of the Investment Advisers Act of 1940 ("Advisers Act"); and Section 42(e) of the Investment Company Act of 1940 ("Investment Company Act").
This action arose from the Defendants' efforts to fraudulently raise money for the OM Global Investment Fund LLC, an unregistered pooled investment vehicle formed in 2009, to acquire pre-IPO shares of Facebook, Inc. In its Complaint filed on September 27, 2013, the Commission alleged OMIM and Movalia falsely represented to a group of investors their interest in Facebook stock would be segregated in a special "side pocket" within the fund, when in reality, the shares were commingled with other fund investments. OMIM and Movalia also distributed false account statements to investors reflecting the purported value of their Facebook investments, even though the fund had sold all of its Facebook positions months earlier. In addition, Movalia, among other things (i) improperly used investor proceeds to make undisclosed loans to related third parties in contravention of the fund's stated investment strategy; (ii) attempted to evade a corporate monitorship instituted in a related Florida state court private lawsuit by forming a new entity with an almost identical name to the fund and using that entity to solicit additional investments in the fund; and (iii) failed to register the fund as an investment company and also failed to register the offer and sale of investments in the fund.
The Final Judgment follows a previous order by United States District Judge Jose E. Martinez in which the Court entered a Judgment of Permanent Injunction and Other Relief by consent against OMIM (i) enjoining the company from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act; Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; Sections 203A, 206(1), 206(2), 206(4) and 207 of the Advisers Act and Advisers Act Rules 206(4)-2 and 206(4)-8; and from aiding and abetting violations of Section 7(a) of the Investment Company Act; (ii) imposing an asset freeze and preventing the destruction or concealment of documents; and (iii) ordering an accounting.
The Court also previously entered a Judgment of Permanent Injunction and Other Relief by consent against Movalia (i) enjoining him from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act; Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; Sections 206(1), 206(2), 206(4) and 207 of the Advisers Act and Advisers Act Rule 206(4)-8; and from aiding and abetting violations of Sections 203A and 206(4) of the Advisers Act and Advisers Act Rule 206(4)-2; and Section 7(a) of the Investment Company Act; (ii) imposing an asset freeze and preventing the destruction or concealment of documents; and (iii) ordering an accounting.
For more information on earlier actions in this case, see Litigation Release No. 22822 (September 27, 2013).