SEC Filing Search

FOR IMMEDIATE RELEASE
2012-103

Washington, D.C., May 25, 2012 — The Securities and Exchange Commission today announced charges against a New York-based fund manager and his two firms for luring investors into a trading program that would purportedly maximize their profits but instead spent their money in unauthorized ways.

The SEC alleges that since at least November 2011, Jason J. Konior and his firms raised approximately $11 million by selling investors limited partnership interests in Absolute Fund LP, an investment vehicle that Konior claimed had $220 million in trading capital. Konior and his firms falsely claimed that Absolute Fund would allocate millions of dollars in matching investment funds, place the combined funds in brokerage accounts through which investors could trade securities, and operate a “first loss” trading program that would allow investors to dramatically increase their potential profits.

However, the SEC alleges that instead of using investor funds for trading purposes, Konior and his firms Absolute Fund Advisors (AFA) and Absolute Fund Management (AFM) siphoned off approximately $2 million of the proceeds to pay redemptions from earlier investors and to pay their personal and business expenses.

The SEC obtained an asset freeze against Konior and his companies late yesterday in federal court in Manhattan.

“Konior falsely portrayed Absolute Fund as a legitimate investment vehicle designed to maximize investors’ access to trading capital in order to grow their hedge fund businesses,” said Bruce Karpati, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “In reality, Konior’s operation became a way for Konior to funnel cash to his firms and himself for unauthorized purposes.”

According to the SEC’s complaint, Konior falsely represented to several investors that upon receipt of their investments, Absolute Fund would:

• Allocate capital of up to nine times the amount of the investor’s capital contribution.
   
• Place the combined funds in a sub-account at a broker-dealer through which the investor could trade securities.
   
• Allocate any trading losses first to the investor’s contribution amount, and then any trading profits would be shared between Absolute Fund and the investor.

The SEC alleges that Absolute Fund did not actually operate the first loss trading program as promised for these investors. Absolute Fund also did not provide these investors with any matching funds or satisfy investor demands for returns of their capital contribution.

The SEC’s complaint charges Konior, AFA, and AFM with violating the antifraud provisions of the Securities Exchange Act of 1934 and seeks, among other things, permanent injunctive relief, disgorgement of ill-gotten gains, and financial penalties. Without admitting or denying the allegations in the SEC's complaint, Konior, AFA, and AFM have consented to the entry of an order freezing their assets, imposing a preliminary injunction against further violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and providing other relief. The Honorable Judge Louis L. Stanton issued the court order granting such relief.

The SEC’s investigation, which is continuing, is being conducted by Catherine Lifeso, Lara Mehraban, Kerri Palen, and Ken C. Joseph of the New York Regional Office. Ms. Lifeso, Ms. Mehraban, and Mr. Joseph are members of the Enforcement Division’s Asset Management Unit. Aaron Arnzen is leading the SEC’s litigation.

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FOR IMMEDIATE RELEASE
2012-102

Washington, D.C., May 24, 2012 ? The Securities and Exchange Commission today announced that it has barred Spencer Barasch, a former enforcement official in the Commission?s Fort Worth office, from appearing and practicing before the Commission for one year for violating federal conflict of interest rules.

The bar was imposed in an order instituting an administrative proceeding and resolves allegations involving Barasch?s representation of Stanford Group Company after Barasch went into private practice. Barasch consented to the Commission?s action without admitting or denying the Commission?s allegations.

Earlier this year, Barasch agreed to pay a $50,000 civil fine to the U.S. Justice Department for the same conduct.

Barasch, a Dallas resident, was the Associate District Director for the Division of Enforcement in the Commission?s Fort Worth office from June 1998 to April 2005. According to the Commission?s order, while at the Commission, Barasch took part ?personally and substantially? in decisions involving allegations of securities law violations by entities associated with Robert Allen Stanford, including Stanford Group Company.

According to the Commission?s order, when Barasch joined a private law firm in 2005, he contacted the Commission?s Ethics Office about whether he could represent Stanford Group Company before the Commission and was told that he was permanently barred from doing so with respect to any matters on which he had participated while at the Commission. The order finds that Barasch declined to represent Stanford Group Company then, but that in the fall of 2006, he accepted an engagement from the Stanford entity and billed it for 12 hours of legal work related to Stanford matters Barasch had participated in while at the Commission.

During this representation, in violation of 18 U.S.C. ? 207(a)(1), Barasch tried to obtain information about the Commission?s Stanford investigation from Commission staff in Fort Worth, but a staff attorney questioned whether Barasch could represent the firm. The staff attorney declined to have any substantive discussions with Barasch and suggested that Barasch contact the Commission?s Ethics Office on the matter. The order finds that Barasch did so and was again told that he was permanently barred from representing Stanford Group Company in the matter, prompting him to end his representation.

U.S. laws prohibit former federal officers and employees from knowingly seeking to influence or appear before any agency on a matter in which they had ?participated personally and substantially? during their federal employment. The Commission?s order finds that Barasch violated this conflict of interest rule, which constitutes ?improper professional conduct? under Rule 102(e) of the Commission?s rules of practice.

Before Barasch can resume appearing and practicing before the Commission, the Commission must determine that Barasch has truthfully sworn that he has satisfied several conditions that reflect on his character and fitness to practice before the Commission.

?This action shows that the Commission takes seriously ethical lapses by attorneys who appear and practice before it, and that such violations will result in serious disciplinary action,? said SEC Associate General Counsel Richard M. Humes.

The Commission?s case was investigated by Thomas J. Karr, Karen J. Shimp and Sarah E. Hancur of the Office of the General Counsel, following an investigation and report on the Stanford matter by the Commission?s Office of the Inspector General. The Commission acknowledges the assistance of the U.S. Attorney?s Office for the Eastern District of Texas.

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FOR IMMEDIATE RELEASE
2012-101

Washington, D.C., May 24, 2012 ? The Securities and Exchange Commission today charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund, used false and misleading marketing materials to lure investors into believing that the fund was earning double-digit annual returns by investing 75 percent of its assets in investments tied to major stock indices. In reality, Geringer?s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in ?returns? to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

?Geringer painted the picture of a successful fund weathering America?s financial crisis through a diversified, conservative investment strategy,? said Marc Fagel, Director of the SEC?s San Francisco Regional Office. ?The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.?

According to the SEC?s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25 percent annual returns in every year of the fund?s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 ? before the fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.

The SEC alleges that Geringer?s actual securities trading was unsuccessful, and by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, the fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC?s complaint.

According to the SEC?s complaint, Geringer further lied to investors on account statements that falsely claimed ?MEMBER NASD AND SEC APPROVED.? The SEC does not ?approve? funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority ? FINRA). Geringer also falsely claimed that the fund?s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC?s complaint alleges Geringer and three related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute barring people from claiming that the SEC has passed on the merits of a particular investment. The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund?s bank account.

The SEC?s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC?s litigation will be led by Sheila O?Callaghan of the San Francisco Regional Office.

The SEC thanks the U.S. Attorney?s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

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