A Chicago hedge fund manager defrauded 60 investors by using false performance reports to cover up $21 million in losses over four years, the Securities and Exchange Commission said Wednesday.
The SEC asked the U.S. District Court for the Northern District of Illinois to bar Edward Thomas Jung, manager of Strategic Income Fund, and his brokerage firm from further violations of the anti-fraud provisions of the federal securities laws, the agency said in a 12-page complaint. The agency also asked the court to impose civil penalties.
Daniel Gregus, assistant director in the SEC's Chicago office, said it's unusual for the SEC to come to the rescue of hedge fund investors, who are generally sophisticated buyers.
"We do protect investors in hedge funds under circumstances such as this in which an individual abuses their trust and, in essence, misappropriates their money," Gregus said.
A lawyer for Jung and his broker-dealer firm wasn't available for comment.
Between 1994 and 1998, Jung solicited investors using false performance reports, the SEC alleged. He told investors he would use their cash and stock deposits as collateral in trading on their behalf for the hedge fund, the SEC said.
Instead, he diverted the money and stocks to his own personal margin trading account and to pay for his broker-dealer's expenses, the SEC said.