SEC Obtains Final Judgment Against Defendants in Hedge Fund Fraud Scheme

Litigation Release No. 24226 / August 6, 2018

Securities and Exchange Commission v. Murakami, et al., Civil Action No. 1:17-CV-10928 (D.Mass. filed May 22, 2017)

On August 6, 2018, a federal court in Boston, Massachusetts, entered a final judgment against Yasuna Murakami, a former Massachusetts-based hedge fund manager, and two advisory entities he operated in connection with a scheme to defraud investors by hiding trading losses and misappropriating investor funds. Murakami and his two advisory companies settled with the SEC and collectively agreed to pay more than $7.9 million in disgorgement and prejudgment interest, to be deemed satisfied by a restitution order entered in a related criminal case against Murakami.

In May 2017, the SEC filed an enforcement action against Murakami and his advisory entities, MC2 Capital Management, LLC and MC2 Canada Capital Management, LLC. The SEC alleged that Murakami misappropriated investor funds for business and personal expenses and made approximately $1.3 million in Ponzi-like payments. The SEC also charged Murakami's former business partner, Avi Chiat. Chiat allegedly helped Murakami raise money from investors while providing investors with fabricated account statements that grossly overstated investment performance. The SEC charged Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada Capital Management, LLC with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. The SEC also charged Murakami and Chiat with aiding and abetting MC2 Capital Management, LLC's and MC2 Canada Capital Management, LLC's violations of the Investment Advisers Act. The SEC's litigation against Chiat remains ongoing.

In a parallel criminal proceeding brought by the U.S. Attorney's Office for the District of Massachusetts arising from the same conduct alleged in the SEC action, on January 9, 2018, Murakami pled guilty to wire fraud. On May 3, 2018, Murakami was sentenced to 6 years in prison and ordered to pay restitution for defrauding investors. In connection with his plea, Murakami admitted to diverting millions of dollars of investor funds to business and personal accounts that he controlled, and using the money to pay for lavish personal expenses such as a luxury sports car, international travel, and high-end department stores, and to make Ponzi scheme-like payments to investors who requested redemption. Murakami also admitted to withholding material information regarding the management of a hedge fund, and to providing investors with falsified account statements and tax documentation in an effort to lull them into believing that their investments were safe.

On May 10, 2018, the Commission entered an administrative order based on Murakami's criminal plea. The Commission's order permanently barred Murakami from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.

The SEC's case is being handled by Colin Forbes, Patrick Noone, David Scheffler, Marty Healey, and Celia Moore of the Boston Regional Office. The SEC appreciates the assistance of the FBI and the U.S. Attorney's Office for District of Massachusetts.