SEC Charges Australia-Based Investment Adviser with Fraud
Litigation Release No. 24291 / September 28, 2018
Securities and Exchange Commission v. Goldsky Asset Management, LLC and Kenneth Grace, No. 18-civ-8870 (S.D.N.Y., filed September 27, 2018)
The Securities and Exchange Commission filed charges against an Australia-based investment adviser Goldsky Asset Management, LLC and its owner, Kenneth Grace, for making false and misleading statements about its business in filings with the Commission and on its website.
According to the SEC's complaint, Goldsky's Forms ADV filed with the Commission in 2016 and 2017, which Grace signed, stated that its hedge fund, Goldsky Global Alpha Fund, LP, had an auditor, a prime broker and custodian, and an administrator. In addition, in its Forms ADV and Forms ADV Part 2A, Goldsky stated that it managed over $100 million in discretionary assets under management. Goldsky's website also claimed that Goldsky Fund earned: 19.45% compounded annual returns since inception, 70.33% compounded monthly returns since inception, and 25.30% returns for the year ended September 30, 2017. The SEC alleges that these statements were false and misleading because Goldsky, Grace and Goldsky Fund had no agreements with service providers, Goldsky and Grace did not manage $100 million of assets, and Goldsky Fund did not have any investment returns as it never had any assets.
The SEC's complaint, filed in federal district court in Manhattan, charges Goldsky and Grace with violating the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, Sections 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, or in the alternative, that Grace aided and abetted Goldsky's violations. The SEC is seeking a judgment ordering permanent injunctive relief and civil monetary penalties against Goldsky and Grace.
The SEC's investigation has been conducted by Gerald Gross, James Hanson, and Jorge G. Tenreiro of the New York Regional Office. The litigation will be led by Mr. Tenreiro, and the case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the Australian Securities and Investments Commission in this matter.