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SEC charges hedge fund and owner with $39 million fraud

On Behalf of | Jun 3, 2022 | Investment Loss

A Detroit-based hedge fund and its sole owner have been charged with defrauding investors out of $39 million in a multi-year scheme, the Securities and Exchange Commission announced. The SEC filed a complaint in the Eastern District of Michigan against EIA All Weather Alpha Fund I Partners LLC (EIA) and Andrew M. Middlebrooks.

From at least mid-2017 to April 2022, Middlebrooks and EIA allegedly deceived investors in the fund by making repeated false statements about the fund’s assets and performance while also falsifying investor account statements.

As part of the deception, the SEC alleges that EIA and Middlebrooks misappropriated new money from investors to pay other investors in Ponzi-like payments designed to convince them the fund was profitable. In addition, Middlebrooks was accused of diverting investor funds for his own personal expenses, including jewelry and credit card payments.

“As we allege in the complaint, Middlebrooks lured investors by touting extraordinary performance returns and then concealed the truth of his fraud, including by fabricating documents provided to investors,” said C. Dabney O’Riordan, Co-Chief of the Asset Management Unit. “Our swift action is intended to protect investors from future harm.”

The SEC obtained a temporary restraining order and an asset freeze in federal court against EIA and Middlebrooks to halt the fraud. The defendants are charged with violating the antifraud provisions of the federal securities laws and Middlebrooks was further charged with aiding and abetting EIA’s violations of the Investment Advisers Act of 1940.

The SEC is seeking injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties against EIA and Middlebrooks.

Lewitas Hyman routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. We bring a unique level of knowledge and experience when representing the rights of investors, including resolving cases through arbitration and litigation when necessary. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655 6002 or through our online contact form for a no-cost evaluation of your matter.