The Securities and Exchange Commission (SEC) of US has charged two San Francisco-based investment adviser firms along with their former CEO, former general counsel, and former portfolio manager with defrauding investors in a $100m hedge fund that invested in subprime automobile loans.
SEC said that in its investigation it found that former CEO Benjamin Chui and former portfolio manager Triffany Mok — who managed the American Pegasus Auto Loan Fund — together with former general counsel Charles Hall, Jr, engaged in improper self-dealing, misused client assets, and failed to disclose conflicts of interest.
The firms — American Pegasus LDG and American Pegasus Investment Management — and Chui, Hall, and Mok settled the SEC’s charges by agreeing to sanctions including bars from the industry and more than $1m in penalties and repayments to the fund.
SEC director of San Francisco Regional Office Marc Fagel said fund advisers have a duty to disclose conflicts of interest and act in the best interests of clients whose assets they are entrusted to manage. Instead, Chui, Hall, and Mok created a tangled financial web, using investor funds for their personal benefit and then attempting to paper over the misconduct by inflating the value of fund assets.