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SEC Files Suit Against Sarasota Hedge Fund Manager

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By ELAINE SILVESTRINI | The Tampa Tribune

Published: January 21, 2009

Updated: 01/21/2009 03:20 pm

Related Links

• Read The Complaint
• Order Against Nadel

Arthur G. Nadel

TAMPA - The Securities and Exchange Commission filed suit in federal court against missing Sarasota hedge fund manager Arthur Nadel and his business entities, accusing Nadel of committing fraud by deceiving investors and funneling their money into secret bank accounts.

A federal judge granted emergency motions from the SEC, appointing a receiver and imposing a restraining order to stop the fraudulent activity. A hearing was scheduled for Feb. 4.

Nadel recently transferred $1.25 million from the investment funds into a secret bank account, the SEC complaint states.

According to the SEC filing, Nadel and his companies have "materially misrepresented" the value of the hedge fund assets. "For example," the complaint states, "the Hedge Funds' internal books and records – used to provide false account statements to investors – indicate the value of their assets exceeds $300 million. In fact, the actual value of the Hedge Funds' assets is only about $506,000."

The complaint states the value of the funds were misrepresented to investors in false account statements directed by Nadel.

One Virginia investor who invested in the Victory IRA Fund, the complaint states, received a statement in October stating his investment was valued at $599,551.55, and the next month's statement valued his investment at $602,965.39. The investor made a second investment through another account with the same fund and received October and November statements valuing that investment at $172,354.07 and $173,335.45.

The actual total value of the entire Victory Fund's holdings was $2,938.86 at the end of October and in November, according to the SEC filing.

The same investor and his wife made other investments through Nadel's holdings, according the the complaint, which states those values were also misstated.

U.S. District Judge Richard Lazzara wrote in an order that the SEC had established "a reasonable likelihood Nadel will harm the investing public by continuing to violate federal securities laws unless immediately restrained." He also found "good cause to believe that unless immediately restrained and enjoined by order of this court, Nadel will continue to dissipate, conceal or transfer" his fund assets.

The Sarasota County Sheriff's office has said it believes the 76-year-old Nadel planned his disappearance before he was scheduled to give investors a $50 million payout on Jan. 15.

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