U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19338 / August 17, 2005
Securities and Exchange Commission v. Peter Krieger, Sheldon Krieger and John Madey, Case No. 05-80312-CIV-MIDDLEBROOKS/JOHNSON (S.D. Fla.)
FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF ENTERED AGAINST DEFENDANT JOHN MADEY
The Securities and Exchange Commission ("SEC") announced that on June 28, 2005, the United States District Court for the Southern District of Florida entered a Final Judgment of Permanent Injunction and Other Relief against Defendant John Madey ("Madey"). The Final Judgment, entered with Madey's consent, enjoins him from violations 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. Additionally, the Final Judgment provides for disgorgement and the imposition of a civil penalty in amounts to be determined by the Court upon the SEC's motion.
The SEC's complaint alleges Madey and two other defendants, Sheldon and Peter Krieger, as principals of a hedge fund called KFSI Equity Fund, L.P. ("KFSI Fund"), misappropriated approximately $3.7 million of the $7.5 million the KFSI Fund raised. The defendants raised money from approximately 45 investors by claiming the KFSI Fund would generate profits by trading in securities. The SEC's complaint also alleges in early 2000, the defendants began diverting money in the KFSI Fund to pay for the operations of Krieger Financial Services, Inc. ("Krieger Financial"), a broker-dealer the defendants controlled. The SEC's complaint claims the defendants concealed their misappropriation of funds and trading losses in the KFSI Fund by issuing false KFSI Fund account statements.
For additional information, see Litigation Release No. 19187 (April 15, 2005).