SEC Charges Atlanta Investment Adviser with Defrauding a Private Fund and Its Investors
Litigation Release No. 24383 / January 28, 2019
Securities and Exchange Commission v. Joseph A. Meyer, Jr. and Statim Holdings, Inc., No. 1:18-cv-5868-LMM (N.D. Ga. Filed December 26, 2018)
The Securities and Exchange Commission has charged an Atlanta investment adviser and an entity he controls with defrauding a private fund they managed and its investors.
The SEC's complaint, filed in federal district court in Atlanta, alleges that, beginning in August 2009 and continuing until at least June 2018, Joseph A. Meyer, Jr., and Statim Holdings, Inc. offered and sold four classes of limited partnership interests in Arjun, L.P., a private fund. The complaint alleges that Meyer promised investors that, in return for giving up substantial portions of their profits, investors in one class would be protected from losses, a feature he called "No Loss Protection," and investors in two other classes would receive guaranteed fixed returns. The complaint further alleges that Meyer told investors that the relinquished profits would be used to fund the No Loss Protection and guaranteed returns when Arjun had insufficient profits.
According to the complaint, Meyer withdrew most of the relinquished profits and used the funds to pay his living expenses. The complaint alleges that, to deceive investors, Meyer recorded on Arjun's books a receivable due from Statim. According to the complaint, Meyer claimed to pay down Statim's receivable, but did so by directly or indirectly borrowing money from the fund, therefore making the guarantees and No Loss Protection illusory because they were backed by nothing other than the receivable that sometimes grew to $2.9 million, or 11.5% of Arjun's net asset value.
The SEC's complaint alleges that Meyer and Statim violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, 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, and that Meyer aided and abetted Statim's violations of these provisions. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
The SEC appreciates the assistance of the Securities and Charities Division of the Georgia Secretary of State's Office.