SEC Bars Hedge Fund Manager Charged with Asset Mismarking and Insider Trading
Litigation Release No. 24548 / July 29, 2019
Securities and Exchange Commission v. Christopher Plaford, 16 Civ. 4511 (KPF) (S.D.N.Y. filed June 15, 2016)
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, Christopher Plaford, a resident of Bedford, N.Y., and fellow hedge fund manager Stefan Lumiere 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, Plaford and Lumiere allegedly used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing their desired prices along to brokers via Lumiere's 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 millions of dollars in inflated management and performance fees to its investment adviser. Because of his position at the adviser, Plaford received a portion of those inflated fees. Additionally, the SEC charged Plaford for his role in an insider trading scheme conducted on behalf of certain funds advised by his firm.
Plaford and Lumiere were also charged criminally for their alleged conduct. On June 9, 2016, Plaford pled guilty, and, on February 20, 2019, he was sentenced to time served, three years' supervised release, a $7,311 fine, and criminal forfeiture of $6,611, representing Plaford's proceeds from his insider trading. Separately, following a jury trial, Lumiere was found guilty on related criminal charges. Lumiere subsequently settled with the SEC and was barred from the securities industry.
The final judgment against Plaford, entered on July 15, 2019, by the U.S. District Court for the Southern District of New York, enjoins him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 204A, 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 Plaford's criminal conviction, the SEC barred Plaford 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.