SEC Announces Fraud Charges Related to Wisconsin Investment Fund
Litigation Release No. 24632 / September 30, 2019
Securities and Exchange Commission v. Bluepoint Investment Counsel, et al., Civil Action No. 19-cv-00809 (W.D. Wisc. filed September 30, 2019)
On September 30, 2019, the Securities and Exchange Commission charged Bluepoint Investment Counsel, LLC, Michael Hull, Christopher Nohl, Greenpoint Asset Management II, LLC, and Chrysalis Financial LLC (collectively "defendants") with fraud and other violations in connection with their operation of the Greenpoint Tactical Income Fund, a Wisconsin-based private investment fund that claims remarkable returns on its purported investments in an illiquid portfolio of gems, minerals, and private equity.
The SEC's complaint alleges that Greenpoint Tactical has claimed annual returns of up to 65%. As alleged, the defendants helped generate these supposed returns by inflating the value of a private company that the fund invested in and by valuing physical gems and minerals in the fund's portfolio through methods that failed to comply with the procedures contained in the fund's operating agreement. According to the complaint, the defendants improperly charged the fund excessive management fees of over $13 million based on the defendants' inflated and improperly-determined valuations. Since 2017, the complaint alleges, the fund has paid the defendants and their entities more than $5.9 million in fees while telling many investors that the fund had no liquidity to meet redemption requests. The complaint also alleges that the defendants and their entities engaged in self-dealing and failed to disclose their conflicts of interest, which included numerous undisclosed short-term loans to the fund some of them with annualized interest rates exceeding 100%, and the fund's undisclosed payment of service fees to entities owned by Nohl and Hull.
The SEC's complaint, filed in the U.S. District Court for the Western District of Wisconsin, alleges violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) 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 complaint seeks injunctive relief, disgorgement of ill-gotten gains, and civil penalties.
The investigation of this matter was conducted by Christopher White and John Kustusch of the SEC's Chicago Regional Office. The investigation was supervised by C.J. Kerstetter and the litigation will be led by Doressia Hutton.