SEC Charges IIG Co-Founder Martin Silver With Fraud
Litigation Release No. 25070 / April 15, 2021
Securities and Exchange Commission v. Martin Silver, Civil Action No. 1:21-cv-3179 (S.D.N.Y. filed April 13, 2021).
The Securities and Exchange Commission today announced partially settled charges against Martin Silver of Long Branch, New Jersey, in connection with a fraudulent scheme to overvalue assets held in a hedge fund offered by his investment advisory firm, International Investment Group (IIG). The SEC previously charged IIG with fraud on November 21, 2019, revoked IIG's registration as an investment adviser on November 26, 2019.
According to the SEC's complaint, from October 2013 to at least July 2018, Silver, the co-founder and chief operating officer of IIG, a formerly registered investment adviser, defrauded IIG's investment advisory clients by, among other things, grossly overvaluing the assets in IIG's flagship hedge fund. As alleged, the overvaluation of these assets resulted in the fund paying inflated fees to IIG, some of which went to Silver. The complaint further alleges that Silver falsely reported to investors that certain fake and overvalued loan assets that IIG sold between funds it advised were legitimate assets and were fairly valued.
The complaint, filed in the U.S. District Court for the Southern District of New York, charges Silver 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) and 206(2) of the Investment Advisers Act of 1940. Silver, who is cooperating with the SEC, consented to a bifurcated settlement, agreeing to be permanently enjoined from violations of the charged provisions, with monetary relief in an amount to be determined by the court at a later date upon motion of the Commission.
On March 30, 2020, the SEC obtained a final judgment on consent enjoining IIG from violating the antifraud provisions of the federal securities laws and requiring IIG to pay more than $35 million in disgorgement and prejudgment interest. The SEC also previously charged other individuals for their roles in IIG's fraud. On July 17, 2020, the SEC charged IIG co-founder David Hu with violations of the antifraud provisions of the federal securities laws. On February 1, 2021, the court entered a partial judgment against Hu enjoining him from violating the charged provisions, and on February 4, 2021, the SEC imposed an associational bar on Hu. The SEC instituted settled administrative proceedings on July 22, 2020, against Carlos Cano, a former IIG employee, for aiding and abetting IIG and Hu's violations. The settled order against Cano imposed a cease-and-desist order, an associational bar, and a $300,000 civil penalty. On December 22, 2020, the SEC charged Charles Samel, a former IIG consultant with aiding and abetting IIG's violations.
The SEC's investigation was conducted by Philip A. Fortino, Lindsay Moilanen, Diego Brucculeri, 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 Division of Examinations. The litigation is being handled by Mr. Fortino and Ms. Moilanen. The matter is being supervised by Sanjay Wadhwa and Daniel Michael. 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.