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SEC Charges Fund Manager With Fraud
The Securities and Exchange Commission went after its second hedge fund
manager in as many months Tuesday, charging David Mobley Sr. with defrauding
investors of at least $59 million since 1993.
The agency, in an emergency enforcement action, said Mobley claimed that his
funds had an average return of 51% per year while he was actually losing
money. All the while, he was spending lavishly on himself.
The SEC said Mobley had consented to an asset freeze and preliminary
injunctions. He also agreed to cooperate with the SEC in an effort to
preserve investor assets. Mobley couldn't be reached to comment Tuesday
evening.
Just last month, the SEC sued hedge fund manager Michael Berger after he
admitted in a letter to shareholders that "financial statements of the fund
that have been distributed over the last several years have been
inaccurate." Berger runs the Manhattan Investment hedge fund.
Mobley manages the Maricopa Investment Fund, Maricopa Index Hedge Fund,
Maricopa Financial and Ensign Trading.
"Each month, Mobley sent investors monthly account statements that grossly
overstated their account balance and rate of return," the SEC said. "He
failed to disclose to his investors that he had invested their money in a
number of his own business ventures -- including a mortgage company, a golf
and country club development, a research and polling company, a cigar
lounge, and a plan to build a stadium on a golf course -- most of which
failed, or that he had given $3.5 million of their money to various
charities."
On Jan. 28, he paid himself a $2 million bonus, even though he knew the
Commodity Futures Trading Commission was looking into his practices.
Mobley recently claimed to have $450 million under management, when he
actually had no more than $33 million left, the agency added.
The CFTC, which filed its own suit Tuesday in the U.S. District Court for
the Southern District of New York, said Mobley told his investors that he
invested their funds primarily in major stock index products using computer
trading models he developed. But he declined to have his funds audited,
explaining to investors that audits would risk divulging his secret and
highly profitable trading strategies, the CFTC said.
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