U.S. Securities and Exchange Commission
Litigation Release No. 18600 / February 27, 2004
SEC SUES FT. MYERS-BASED INVESTMENT
ADVISOR AND OTHERS IN $10 MILLION HEDGE FUND FRAUD
SECURITIES AND EXCHANGE COMMISSION v. KS Advisors, Inc. et. al.,
Civil Action No. 2:04-CV-105-FtM-29(M.D. Fla.)(complaint filed February 26, 2004)
The Securities and Exchange Commission (Commission) announced today that on February 26, 2004, it filed an emergency action to halt an alleged hedge fund fraud conducted by Ft. Myers-based KS Advisors, Inc. (KS Advisors) and its principals, Scott Fine (Fine) and Kevin Boyle (Boyle). According to the Commission's Complaint, since at least 2000, Fine and Boyle have used their company, KS Advisors, to raise approximately $10 million from about 100 investors nationwide and abroad through investments in two hedge funds, KS Condor Partners, Ltd., II (Condor II) and Damian Partners, LLC (Damian Partners). On February 27, 2004, Judge Steele, U.S. District Judge for the Middle District of Florida, issued various emergency orders against the defendants, including temporary restraining orders, asset freezes against KS Advisors, Condor II, and Damian Partners, the appointment of a receiver, and other emergency relief.
The Commission's Complaint alleges that the representations made by KS Advisors, Boyle and Fine to the hedge funds' investors about the ever-increasing profits and net asset values of Condor II and Damian Partners were completely false. According to the Commission's Complaint, the investments made by Boyle and Fine on behalf of the hedge funds, which consist mostly of speculative options trading, have lost millions of dollars. The Commission's Complaint also alleges that Fine and Boyle charged investors fraudulent fund performance fees based on the fictitious gains in the values of the two hedge funds and additional undisclosed "advisory fees."
The Commission's complaint charges KS Advisors, Condor II, Damian Partners, Fine and Boyle with violating 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 KS Advisors, Fine and Boyle with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (Advisers Act).