FROM: U.S. SECRUITIES AND EXCHANGE COMMISSION
Court Orders New York-Based Hedge Fund Manager and Firm to Pay Nearly $5 Million in Disgorgement and Penalties
The Securities and Exchange Commission announced today that, on January 3, 2013, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York entered final judgments against hedge fund manager Chetan Kapur and his firm, ThinkStrategy Capital Management (ThinkStrategy), ordering them to jointly and severally pay disgorgement of $3,988,196.59 and civil penalties in the amount of $1,000,000.
The final judgments stem from a partially-settled civil injunctive action filed by the Commission on November 10, 2011. The SEC’s complaint alleged that over nearly seven years, Kapur and ThinkStrategy engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials. In particular, Kapur and ThinkStrategy materially overstated the performance of their ThinkStrategy Capital Fund, giving investors the false impression that the fund’s returns were consistently positive and minimally volatile. The complaint also alleged that Kapur and ThinkStrategy repeatedly inflated the firm’s assets, exaggerated the firm’s longevity and performance history, and misrepresented the size and credentials of ThinkStrategy’s management team.
With respect to a second hedge fund they managed, the TS Multi-Strategy Fund, the complaint alleged that Kapur and ThinkStrategy misstated the scope and quality of due diligence checks on certain managers and funds selected for inclusion in the fund-of-funds’ portfolio. As a result, the TS Multi-Strategy Fund made investments in certain hedge funds that were later revealed to be Ponzi schemes or other serious frauds, including Bayou Superfund, Valhalla/Victory Funds, and Finvest Primer Fund.
The Commission charged Kapur and ThinkStrategy with 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 Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the allegations in the Commission’s complaint, Kapur and ThinkStrategy consented to the entry of November 18, 2011 judgments permanently enjoining them from violating the above provisions. Kapur also consented to a November 30, 2011 SEC order permanently barring him from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
