Former Investment Adviser Settles Fraud Action
Litigation Release No. 24790 / April 6, 2020
Securities and Exchange Commission v. International Investment Group, LLC, No. 19-civ-10796 (S.D.N.Y. filed November 21, 2019)
On March 30, 2020, the U.S. District Court for the Southern District of New York entered a final consent judgment against International Investment Group, LLC (IIG), a former registered investment adviser, which the Securities and Exchange Commission had charged with securities fraud for hiding losses and selling millions in fake loan assets to clients.
The SEC's complaint, filed on November 21, 2019, alleges that IIG grossly overstated the value of defaulted loans in the fund's portfolio to conceal losses in its flagship fund. In an effort to continue its deception, IIG later doctored the firm's records to show that the defaulted loans had been repaid and that the proceeds had been used to make new loans, when in fact there had been no repayment and the purported new loans were fake. The SEC's complaint further alleges that IIG executives sought to raise money to meet investor redemptions and other the liabilities by selling at least $60 million in fake trade finance loans to other clients, including a collateralized loan obligation, a retail mutual fund, and two hedge funds. To deceive clients into purchasing the loans, IIG created fake loan documentation to substantiate the non-existent loans, including fake promissory notes and a forged credit agreement.
Without admitting or denying the SEC's allegations, IIG consented to the entry of a final judgment, enjoining it from 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) and 206(2) of the Investment Advisors Act of 1940. The final judgment also requires IIG to pay more than $35 million is disgorgement and prejudgment interest. The SEC previously revoked IIG's registration as an investment adviser on November 26, 2019.
The SEC's ongoing investigation is being conducted by Philip A. Fortino, Lindsay Moilanen, and Sheldon L. Pollock of the New York Regional Office and Osman Nawaz of the Complex Financial Instruments Unit, with assistance from Eli Bass of the Office of Compliance Inspections and Examinations, and is being supervised by Sanjay Wadhwa and Daniel Michael. The SEC's litigation is being handled by Mr. Fortino, Ms. Moilanen, Lee A. Greenwood, and Neal Jacobson.