A court has entered a final judgment against a New York City-based firm that made material misrepresentations and unsubstantiated statements in a regulatory form, Financial Advisor reported.
The Securities and Exchange Commission filed a complaint in August 2024 against Wisdom Capital Management Group Ltd., alleging that the firm made misrepresentations in its December 2023 Form ADV filed with the SEC.
The form, used by investment advisers to register with both the SEC and state securities authorities, requires the adviser to report information about its business, ownership, and other information.
In its Form ADV, Wisdom claimed it is a public company operating out of office space in New York City; that it manages $10 million in private funds in the United States; that it advises two private funds; and that a separate registered investment adviser reports information about these two private funds on its own Form ADV.
But according to the SEC, the current business resident of that New York office space had no knowledge of Wisdom or its purported management personnel, and the other adviser did not report information about the two purported private funds.
No reporting was found of information about the two private funds on other filings with the SEC, and a search of the SEC’s public company database yields no information on Wisdom. The firm failed to respond to requests by the commission to provide records to substantiate the information on the Form ADV.
According to the SEC, Wisdom falsely claimed it qualified as an exempt reporting adviser, a regulatory category generally available to certain private fund advisers that are exempt from full SEC registration.
The U.S. District Court for the District of Columbia entered a final judgment against Wisdom. The judgment, which was entered by default, enjoins the firm from future violations of Sections 204(a) and 207 of the Investment Advisers Act of 1940.
The judgment also enjoins Wisdom, its owners, and its executive officers from filing a Form ADV as an Exempt Reporting Adviser. In addition, Wisdom was ordered to pay a civil penalty of $1,152,316.
Authorities said Wisdom Capital was among ten shell entities created to convince retail investors to buy shares of a Nasdaq-listed company based in the Cayman Islands through individuals posing as financial advisors in WhatsApp chats. The shell entities filed false investment forms with the SEC between 2023 and 2025.
Co-conspirators allegedly promised returns of 300-500% in the WhatsApp chats, telling investors that they would be fully compensated for any losses. The Department of Justice said that as investors were told to buy stock in the public company promoted by WhatsApp accounts associated with the sham entities, foreign-based brokerage accounts sold the company’s stock for gross proceeds of as much as $211 million.
On April 17, 2024, the public company’s stock price collapsed by approximately 88%, resulting in significant investor losses.
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