U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23126 / October 31, 2014
Securities and Exchange Commission v. Vineet Kalucha et al., Civil Action No. 14 CV 3247 (RMB)
Court Authorizes the Payment of Certain Expenses and the Redemption of Investors' Investments in Aphelion Us Fund, LP and Aphelion Offshore Fund, Ltd.
The Securities and Exchange Commission (the "SEC") announced that, at the request of the parties, the Honorable Richard M. Berman, United States District Court Judge for the Southern District of New York, entered on October 30, 2014 an order that modified the Order of Preliminary Injunction, Asset Freeze, and Other Ancillary Relief that the Court had entered on July 14, 2014 to authorize the payment of certain expenses and the redemption of investors' investments in Aphelion US Fund, LP and Aphelion Offshore Fund, Ltd. (collectively, the "Funds").
The order authorizes Funds' administrator, Pinnacle Canada Fund Administration, Ltd. ("Pinnacle"), to distribute $5,562,135.55 to investors in the Funds on a ratable basis in accordance with their respective account balances and $72,333.78 to service providers to cover due and owing expenses which are appropriately payable under the terms of the Funds' organizational documents. The order also authorizes the Funds to hold a total of $615,525.29 in cash as a reserve to address uncertain future expenses. This $615,525.29 shall remain frozen pending further order of the Court.
As previously announced, on May 5, 2014, the SEC filed fraud charges and sought emergency relief against Aphelion, Aphelion's chief investment officer, Vineet Kalucha, and Aphelion's chief financial officer, George Palathinkal. The SEC's complaint alleges that Kalucha fraudulently altered an outside audit firm's report reviewing the performance of an investment account he managed, that Palathinkal allegedly learned about Kalucha's falsifications, which essentially changed an investment loss into a major investment gain in the account, and that the falsified report showing the phony gain instead of the actual loss was distributed to prospective investors. The complaint further alleges that investors were separately provided false information about Aphelion's assets under management and Kulucha's litigation history, and that Kalucha allegedly siphoned investor proceeds for his luxury car payments and settlements of legal actions against him personally that are unrelated to Aphelion.
For further information, please see Litigation Release Number LR-22988 (May 9, 2014) [SEC Announces Charges and Asset Freeze Against Hedge Fund Advisory Firm Distributing Falsified Performance Results], Litigation Release Number LR-22994 (May 16, 2014) [Court Extends Asset Freeze and Temporary Restraining Order], Litigation Release Number LR-23030 (June 24, 2014) [Court Modifies and Extends Asset Freeze and Temporary Restraining Order]