The U.S Securities and Exchanges Commission (SEC) has ordered an asset freeze on three digital currency investment funds for fraud. It claims that the three funds misrepresented their figures and defrauded tens of millions of dollars from investors.
The regulator received a temporary restraining order and asset freeze against the three funds from the U.S District Court for Western Pennsylvania. The funds are operated by two brothers, Shane and Sean Hvizdzak.
According to the SEC filing, the two brothers operated the funds from July last year to May this year irregularly. The regulator alleges that they misrepresented fund performance and fabricated their account statements to prove to investors that they were performing excellently when they were losing money.
In the third and fourth quarters of last year, the brothers claimed that their funds made 100.77% and 92.90% respectively. However, the funds had lost money during the two quarters.
Additionally, the two were defrauding their investors and channeling the money to their personal accounts. The SEC alleges that they diverted close to $26 million from the funds to personal bank accounts and to digital currency wallets.
According to a report from a local outlet, the two brothers used their good standing in the community to lure investors. Shane Hvizdzak is a professor at the University of Pittsburg, while his brother Sean is an attorney whose clients include the City of Bradford Board of Health. Thousands of local investors put their money in the funds, with some investing their life savings, the report revealed.
The SEC is charging the two brothers and their three funds – Hvizdzak Capital Management, LLC, High Street Capital, LLC, and High Street Capital Partners, LLC – with violating the anti-fraud provisions of the federal securities laws. The court also ordered “accounting, expedited discovery, and an order prohibiting the destruction of documents.”
The two brothers are to appear in court on June 30 for a hearing on whether the court will extend the asset freeze and the issuance of preliminary injunction.
Adam Aderton, the co-chief of the SEC’s asset management team urged investors to be wary of promises of high returns as they are mostly scams. He stated, “As alleged in our complaint, the Hvizdzaks touted exceptional, but false, performance to potential investors when offering their fund. Investors should be skeptical of claims that seem too good to be true.”
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