The Securities and Exchange Commission has obtained a final judgment against a hedge fund manager the agency charged with falsely inflating assets in portfolios he managed. The SEC also barred him from the securities industry.
According to the SEC's complaint, filed June 15, 2016, Stefan Lumiere and fellow hedge fund manager Christopher Plaford engaged in a fraudulent scheme to falsely inflate the value of securities held by a hedge fund advised by their firm. For an 18-month period, Lumiere and Plaford used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing their desired prices along to brokers via his personal cell phone or a flash drive delivered by a courier. The fund consequently reported artificially inflated returns and monthly net asset values, and paid out millions of dollars in inflated management and performance fees to its investment adviser.
Lumiere and Plaford were also charged criminally for their alleged conduct. Lumiere was convicted after a trial and was sentenced to eighteen months imprisonment followed by three years' supervised release and a $1 million fine. Plaford pled guilty but has not yet been sentenced. The SEC's action against Plaford has been stayed pending the completion of the criminal case.
The final judgment against Lumiere, entered on February 20, 2018 by the U.S. District Court for the Southern District of New York, enjoins Lumiere from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Based on the entry of the judgment and Lumiere's criminal conviction, the SEC barred Lumiere from the securities industry.
The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.