SEC Files Emergency Action to Halt Ongoing Fraud by Northshore Asset Management

The Securities and Exchange Commission announced this week that it filed an emergency enforcement action to halt a fraud by Northshore Asset Management LLC (Northshore) and its three principals, concerning their misappropriation of assets of two hedge funds, Ardent Research Partners, L.P. (Ardent Domestic) and Ardent Research Partners, Ltd. (Ardent Offshore).

In its complaint, the Commission alleges that Northshore, through its principals, diverted approximately $37 million of the funds’ assets to their control and invested them in illiquid securities of, and made loans to, entities in which Northshore and its principals have interests.

In its complaint, the Commission names Northshore, Ardent Domestic, Ardent Offshore (collectively, the Ardent Funds), Saldutti Capital Management, L.P. (SCM), Kevin Kelley, Robert Wildeman and Glenn Sherman. The Commission’s complaint further alleges that:

  • the defendants did not disclose to the Ardent Funds’ investors that Northshore had purchased SCM, investment adviser to the Ardent Funds, and that Northshore was now managing a significant portion of the Ardent Funds’ assets;

  • the defendants made numerous misrepresentations concerning (i) the nature of the investments, (ii) the liquidity of the investments, and (iii) the use of investor funds for undisclosed loans; and
  • for the last several months, the defendants have refused to honor valid redemption requests from Ardent Domestic investors.

Mark K. Schonfeld, Director of the Commission’s Northeast Regional Office, stated, “This action demonstrates that the Commission will act quickly to preserve the assets of defrauded investors. This case also emphasizes the Commission’s determination to hold hedge fund managers accountable when they knowingly participate in schemes that defraud investors.”

In its emergency enforcement action, the Commission is seeking, among other emergency relief, a temporary restraining order (i) freezing the defendants’ assets; and (ii) appointing a temporary receiver over Northshore, SCM, Ardent Domestic, and Ardent Offshore. In addition to this emergency relief, the Commission also seeks orders enjoining the defendants, preliminarily and permanently, from committing future violations of the federal securities laws, and a final judgment ordering the defendants to disgorge ill-gotten gains, and assessing civil penalties.

You may like these other stories...

Could the IRS disallow Ice Bucket Challenge charitable contributions?Unless you’ve been living under a rock, you’ve probably heard of – or participated in – the ALS Ice Bucket Challenge.I was...
As a general rule, a taxpayer can deduct the full amount of monetary contributions made to a qualified charitable organization, as long as certain substantiation requirements are met. These donations are typically made...
Hertz withdraws full-year forecast, cites accounting review, challengesRental car company Hertz Global Holdings Inc. said on Tuesday it is withdrawing its full-year financial forecast and expects 2014 results to be “...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.