A years-long dispute between federal authorities and a New Jersey hedge fund advisor ended recently with most charges being dropped.
On Oct. 29, the Security and Exchange Commission announced the U.S. District Court for the Southern District of New York partially granted a motion for summary judgment by Mountainside-based private fund investment adviser Yorkville Advisors, LLC and firm executives Mark Angelo and Edward Schin. All remaining claims against the parties were then dismissed with prejudice.
The dispute stemmed from charges filed in 2012 by the SEC, which allege Yorkville and its executives of scheming to overvalue assets under management and exaggerate the reported returns of private funds they managed to hide losses and increase the fees collected from investors.
According to the federal agency, the alleged violations included ignoring and withholding unfavorable information about fund investments from Yorkville’s auditor, which enabled Yorkville to carry some of its largest investments at inflated values.
Yorkville was also accused of misleading investors about the liquidity of the funds, collateral underlying the investments, use of a third-party valuation firm, and failing to adhere to Yorkville’s stated valuation policies.
This case serves as a reminder of the importance of accurate valuations and portfolio company reporting for private funds.