U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22141 / October 26, 2011
Securities and Exchange Commission v. Andrey C. Hicks and Locust Offshore Management, LLC, as Defendants, and Locust Offshore Fund, Ltd., as Relief Defendant (United States District Court for the District of Massachusetts, Civil Action No. 1:11-cv-11888-RGS)
Commission Obtains Temporary Restraining Order and Asset Freeze Against Massachusetts-Based Purported Hedge Fund Manager
The Securities and Exchange Commission today announced it has charged Andrey C. Hicks of Boston, Mass., and Locust Offshore Management, LLC, his investment advisory firm, with misleading prospective investors about their supposed quantitative hedge fund and diverting investor money to the money manager's personal bank account. The SEC also announced that Judge Richard Stearns of the U.S. District Court in Massachusetts has issued a temporary restraining order that, among other things, freezes the assets of the money manager, his advisory firm, and the hedge fund.
The SEC alleges that Hicks and his advisory firm made numerous misrepresentations when soliciting individuals to invest in a purported hedge fund Hicks controlled called Locust Offshore Fund, Ltd. According to the SEC's Complaint, Hicks and his advisory firm falsely represented to potential investors that:
- Hicks obtained undergraduate and graduate degrees from Harvard University;
- Hicks worked for Barclays Capital, where he "grew his book nearly two-fold and expanded his group's assets under management to roughly $16 [billion]";
- Ernst & Young served as the fund's auditor;
- Credit Suisse served as the fund's prime broker and custodian; and
- the fund was a business company incorporated under the laws of the British Virgin Islands.
By making these representations and creating other indicia of legitimacy, the SEC alleges that Hicks may have obtained at least $1.7 million from 10 investors and may have misappropriated at least a portion of these funds for personal expenses.
The SEC's complaint charges Hicks and Locust Offshore Management, LLC with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also names the Locust Offshore Fund, Ltd. as a relief defendant, alleging that it received investor funds to which it had no right.
The Commission acknowledges the assistance of the Swiss Financial Market Supervisory Authority and the British Virgin Islands Financial Services Commission. The Commission's investigation is ongoing.