The U.S. Securities and Exchange Commission (SEC) charged an investment advisor with overstating the value of his clients’ assets by more than $139 million. Yehuda Shiv, an Israeli citizen and a New York resident, allegedly tried to hide trading losses from his clients.
The SEC said that Shiv provided clients with sizable returns utilizing a trading strategy in their accounts that involved borrowing foreign currencies to purchase mortgage backed securities (MBS). However, in late 1994 Shiv’s trading strategy became unprofitable and clients suffered substantial losses. Because he did not want to disclose the losses, Shiv began creating falsely profitable account statements in 1995 and continued providing them to approximately ten clients until 2001. By October 31, 2001, Shiv had allegedly overstated the net value of clients’ assets by more than $139 million.
Shiv also transferred assets between clients’ accounts to further conceal his fraud, according to the SEC announcement.
The SEC said that Shiv charged his clients management and performance fees based on the artificially inflated value of their portfolios.
The SEC also filed actions against two New York City investment advisors that Shiv controls: Sagam Corp. and Sagam Capital.
The SEC is seeking injunctive relief, disgorgement of ill-gotten gains and civil penalties. Additionally, the U.S. District Court for the Southern District of New York — which is the court where the case was filed — granted the SEC’s application for a preliminary injunction and other emergency relief, including an asset-freeze and the appointment of a receiver to take control of the two corporations.
