(Reuters) - A Toronto hedge fund manager and his New York firm agreed to reimburse $2.88 million to investors who were misled about the firm’s strategy and performance, and suffered losses after their money was plowed into illiquid penny stocks, the top U.S. securities regulator said on Thursday.
QED Benchmark Management LLC and its founder Peter Kuperman did not admit wrongdoing in agreeing to settle with the U.S. Securities and Exchange Commission. Kuperman also agreed to a $75,000 civil fine and a ban from the securities industry.
The SEC said QED and Kuperman raised millions of dollars using a misleading mixture of hypothetical and real returns to advertise their performance, and conceal a 78.8 percent loss in the first quarter of 2009.
According to the SEC, Kuperman later began working with two Canadian stock promoters, and by 2013 had invested nearly all fund assets in Emo Capital Corp, which traded over-the-counter as NuVitality, and other illiquid common and convertible securities.
Kuperman was accused of doing this despite telling investors he would follow more traditional investment strategies, and that their investments would be better diversified.
The SEC also said Kuperman played down the magnitude of his fund’s health in 2013 when investors sought to redeem their money, and eventually used new money located by the promoters to issue partial redemptions to some of his complaining investors.
Andrew Calamari, head of the SEC’s New York office, said in a statement that the accord provides “full monetary relief” to QED’s investors.
A lawyer for QED and Kuperman had no immediate comment.
Reporting by Jonathan Stempel in New York; editing by Grant McCool