SEC Obtains Final Judgment Against Defendant in Hedge Fund Fraud Scheme

Litigation Release No. 24510 / June 24, 2019

Securities and Exchange Commission v. Avi Chiat, No. 1:17-CV-10928-IT

On June 21, 2019, a federal court in Boston, Massachusetts, entered a final judgment against Avi Chiat, a former Massachusetts-based hedge fund manager in connection with a scheme to defraud investors by hiding trading losses. Chiat, the last remaining defendant in the case, settled with the SEC and agreed to pay $345,158 in disgorgement and prejudgment interest, and a civil penalty of $184,767.

In May 2017, the SEC filed an enforcement action against Chiat, Yasuna Murakami, and their 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 alleged that Chiat 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 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. 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 final judgment entered against Chiat orders him to pay disgorgement and prejudgment interest of $345,158 and a civil penalty of $184,767, and permanently enjoins him from violating the charged provisions of the federal securities laws or participating in securities transactions on behalf of others. Previously, in August 2018, the court entered a final judgment against Murakami and the two advisory entities that ordered them to pay more than $7.9 million in disgorgement and prejudgment interest, deemed satisfied by a restitution order entered in a related criminal case against Murakami brought by the U.S. Attorney's Office for the District of Massachusetts, and permanently enjoined them from violating the charged provisions of the federal securities laws and Murakami from participating in securities transactions on behalf of others.

The SEC's case was 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.