Stealing From Investors Through Fraudulent Expenses

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The Securities and Exchange Commission charged a hedge fund manager, his investment advisory firm, and an employee with stealing from investors in two hedge funds. The theft was carried out by charging more than $1 million for fraudulent research expenses and fees.

According to the SEC complaint, Steven R. Markusen, the owner of Archer Advisors LLC, and an employee, Jay C. Cope, diverted investor’s money from the funds for fake research expenses. They have not settled with the SEC so I only have the government’s side of the case.

The SEC accused Markusen of charging fund investors twice for the same fake research expenses. First, he billed the funds directly for Cope to conduct “research” for the funds. Second, they diverted soft dollars from the hedge funds to Cope for the same “research”, claiming Cope was an independent consultant. The soft dollars were supposed to be used to buy third-party investment research that benefited the funds.

According to the complaint, Markusen was using the expense reimbursements to pay Cope’s salary. The fund documents required employees to be paid by the fund manager. Archer was trying to disguise the salary as research payable by the fund.

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Author: Doug Cornelius

You can find out more about Doug on the About Doug page

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