SEC charges Northbrook hedge fund execs with fraud

Two executives at a Northbrook hedge fund have been charged with fraud after allegedly cheating clients out of over a million dollars.

Samuel Barnett and Matthew Aven, top executives at SBB Research Group, LLC, used their own valuation model to inflate the value of their investments, the Securities and Exchange Commission said. The pair used that model to misstate the fund’s historical performance and overcharged investors about $1.4 million in fees, the SEC said.

After the SEC took notice of the valuation issues, Barnett, the fund’s Chief Executive Officer, and Aven, the Chief Operating and Compliance Officer, attempted to cover up their dealings by slashing their flagship fund and crediting investors for the overcharged fees without an explanation, the SEC said.

”Investors rely on investment advisers to accurately value assets and disclose fund performance,” said Daniel Michael, Chief of the SEC Division of Enforcement’s Complex Financial Instruments Unit. “As alleged in the SEC’s complaint, SBB, Barnett and Aven intentionally manipulated valuation models to deceive current and prospective investors.”

The SEC is seeking permanent injunctions and civil penalties against SBB, Barnett and Aven, they said. Their complaint was filed in the U.S. District Court for the Northern District of Illinois.