SEC ANNOUNCES FRAUD CHARGES AGAINST FORT LAUDERDALE, FLORIDA-BASED INVESTMENT ADVISORY FIRM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
01/21/2015 01:15 PM EST

The Securities and Exchange Commission announced fraud charges and an asset freeze against a Fort Lauderdale, Florida-based investment advisory firm, its manager, and three related funds in a scheme that raised more than $17 million since November 2013.

The SEC’s complaint filed in federal court in the Southern District of Florida last week charged Elm Tree Investment Advisors LLC, its founder and manager, Frederic Elm, and Elm Tree Investment Fund LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Motion Opportunity LP.  According to the complaint, Elm, formerly known as Frederic Elmaleh, his unregistered investment advisory firm, and the three funds misled investors and used most of the money raised to make Ponzi-like payments to the investors.  The complaint alleges that Elm treated the funds as his personal piggy bank, tapping them to buy a $1.75 million home, luxury automobiles, and jewelry, and to cover daily living expenses.  Elm’s wife, Amanda Elm, formerly Elmaleh, is named as a relief defendant based on her receipt of investor monies.

"Elm misled investors about how he and his funds would use their money and about how much he charged them in fees," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  "As a result, Elm was able to wrongfully take millions of dollars from investors without their knowledge."

The SEC's complaint charges Elm, his advisory firm and the Elm Tree funds with violating anti-fraud provisions of federal securities laws and SEC anti-fraud rules.  The SEC is seeking relief for investors, including return of allegedly ill-gotten gains, with interest, and financial penalties.

The Honorable William Dimitrouleas on Friday granted the SEC’s request for a temporary restraining order and temporary asset freeze against Elm, his firm, and the three Elm Tree funds.  The judge ordered a temporary asset freeze against Amanda Elm and required her and the other defendants to provide accountings.  Judge Dimitrouleas also entered an order appointing Grisel Alonso as receiver for Elm Tree Investment Advisors and the Elm Tree funds.  A court hearing has been scheduled for January 29.

The SEC's investigation, which is continuing, has been conducted by Katharine E. Zoladz and Mark Dee and supervised by Elisha L. Frank in the Miami Regional Office.  Patrick Costello is leading the SEC’s litigation.

SEC CHARGES CEO OF INVESTMENT ADVISORY FIRM WITH LYING TO CalPERS AND OTHER CLIENTS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., April 18, 2013 — The Securities and Exchange Commission charged the CEO of Chicago-based investment advisory firm Simran Capital Management with lying to the California Public Employers' Retirement System (CalPERS) and other current and potential clients about the amount of money managed by the firm.

Institutional investors such as CalPERS often use assets under management (AUM) as a metric to screen prospective investment advisers soliciting their business. An SEC investigation revealed that while pitching Simran's services, Mesh Tandon falsely certified to CalPERS that his firm satisfied its minimum AUM requirements. After fraudulently obtaining the business from CalPERS, Tandon also falsely inflated Simran's AUM in communications with other potential clients with whom he touted his firm's relationship with CalPERS. Tandon also fraudulently reported an inflated AUM in filings with the SEC, and he later attempted to mislead SEC examiners during a routine examination of Simran.

Tandon, who previously lived in Chicago and now resides in Texas, has agreed to settle the SEC's fraud charges.

"Tandon deliberately undermined the CalPERS screening process by grossly misrepresenting his firm's purported assets under management," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "To make matters worse, he then used his association with CalPERS to lure other public institutional investors under false pretenses."

According to the SEC's order instituting settled administrative proceedings against Tandon, he represented to CalPERS in May 2008 that Simran met explicit AUM requirements and managed at least $200 million as of Dec. 31, 2007. In fact, Simran managed approximately $80 million at that time. Evidence indicates that Tandon was aware that Simran did not meet the CalPERS requirements for AUM.

According to the SEC's order, Tandon touted Simran's relationship with CalPERS to other prospective clients from 2008 to 2011, and he instructed other Simran employees to do the same. On more than a dozen occasions, Tandon and Simran employees falsely inflated the firm's AUM in communications with employee retirement systems and other prospective clients. Tandon and Simran also overstated the AUM in at least four of the firm's Form ADVs filed with the SEC. In February 2012, Simran withdrew its SEC registration as an investment adviser and has since ceased operations.

According to the SEC's order, Tandon violated Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940. Tandon neither admitted nor denied the findings, and agreed to be barred from the securities industry and pay disgorgement of $20,018, prejudgment interest of $1,680, and a penalty of $100,000.

The SEC's investigation was conducted by Peter K.M. Chan along with Jonathan I. Katz and Andrew O'Brien in the Chicago Regional Office. They were assisted by members of the Chicago Regional Office's examination staff including Susan M. Weis, Jeson G. Patel, and Max J. Gillman.