Press Release FOR IMMEDIATE RELEASE 2016-14 Washington D.C., Jan. 28, 2016 — The Securities and Exchange Commission today announced that a Manhattan-based investment advisory firm and its Toronto-based hedge fund manager have agreed to settle charges that they misled investors about a fund’s investment strategy and historical performance. They will reimburse investors $2.877 million in losses. According to the SEC’s order instituting a settled administrative proceeding, QED Benchmark Management LLC and its founder/fund manager Peter Kuperman avoided disclosing heavy trading losses to investors by using a misleading mixture of hypothetical and actual returns when providing the fund’s performance history. After obtaining millions of dollars from investors based on these misrepresentations, QED Benchmark and Kuperman deviated from their stated investment strategy and poured most of the fund’s assets into a single penny stock. They went on to make misleading and incomplete disclosures to fund investors about the value and liquidity of this penny stock investment. “Investment advisers must be completely candid when disclosing two key features that investors rely upon when making investment decisions: investment strategy and historical performance. This settlement enables investors in the QED Benchmark LP hedge fund to receive full monetary relief for losses suffered when they were misled on both fronts,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. The SEC’s order finds that Kuperman and QED Benchmark Management violated the antifraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934, and Investment Advisers Act of 1940. They consented to the order without admitting or denying the findings. In addition to making the $2.877 million payment to fully reimburse fund investors for their losses, Kuperman has agreed to pay a $75,000 penalty and be barred from the securities industry. The SEC’s investigation was conducted by Karen E. Willenken and Thomas P. Smith Jr. of the New York office. The case has been supervised by Sanjay Wadhwa.
Wow...they poured most of the fund it into a single penny stock. I bet there's more to the story that the investigators failed to uncover about why Kuperman did such and I bet it had nothing to do with an investment.
Actually, that's exactly what they did... through purchases of common stock and convertible debentures that became worthless. Of course, buying a penny stock isn't illegal, BUT misrepresenting performance to your clients is what got them busted. "All of the investors were provided with marketing documents containing fraudulent historical results, and there is no evidence that any of them received any additional, corrective disclosure." (para 13). You can read the SEC filing here, it's a publicly available document... https://www.sec.gov/litigation/admin/2016/33-10009.pdf