The SEC Charges Miami Hedge Fund Adviser For Deceiving Investors

On May 29th., 2012, the Securities and Exchange Commission (SEC) charged a Miami-based hedge fund adviser for deceiving investors about whether its executives had personally invested in a Latin America-focused hedge fund.

According to the SEC’s investigation, they found that Quantek Asset Management LLC made misrepresentations about fund managers having “skin in the game” along with investors in the $1 billion Quantek Opportunity Fund. When in fact, Quantek’s executives never invested their own money.

The SEC’s investigation also revealed that Quantek misled investors about the investment process of the funds it managed as well as certain  transactions involving its lead executive Javier Guerra and its former parent company Bulltick Capital Markets Holdings LP.

In an SEC website article, Bruce Karpati, Co-Chief of the SEC Enforcement Division’s Asset Management Unit said,“When making an investment decision, private fund investors are entitled to the unvarnished truth about material information such as management’s skin in the game or the adviser’s handling of related-party transactions. Quantek’s investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents.”

The SEC stated that Bulltick, Guerra, and former Quantek operations director Ralph Patino are charged along with Quantek in the SEC’s enforcement action. They have agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges, and Guerra and Patino agreed to securities industry bars. It was stated on the SEC's website that Quantek, Guerra, Bulltick, and Patino all settled the charges without admitting or denying the findings. Quantek and Guerra have agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively. Bulltick agreed to pay a penalty of $300,000, and Patino agreed to a penalty of $50,000. Guerra consented to a five-year securities industry bar, and Patino consented to a securities industry bar of one year. Quantek and Bulltick agreed to the censures. They all consented to orders that they cease and desist from committing or causing violations of certain antifraud, compliance, and recordkeeping provisions of the Investment Advisers Act of 1940 and the Securities Act of 1933.