SEC Charges Hedge Fund Advisory Firm with Conducting Fraudulent Fund Valuation Scheme

The SEC charged an investment advisory firm and its two owners with fraudulently inflating the prices of securities in hedge fund portfolios they managed.

An SEC investigation found that an adviser from AlphaBridge Capital Management ("AlphaBridge") told investors and the company's auditor that it obtained independent price quotes from broker-dealers for certain unlisted, thinly traded residential mortgage-backed securities. Instead, the SEC found, AlphaBridge gave internally derived valuations to broker-dealer representatives to pass off as their own.

The inflated valuation of these assets, according to the SEC, caused the funds to pay higher management and performance fees to AlphaBridge.

See: SEC Order against AlphaBridge and Co-Owners; SEC Cease-and-Desist Order.