Hedge fund manager and investment adviser Trueblue Strategies LLC owner Neil Godbole has agreed to settle for $40,000 Securities and Exchange Commission charges that he hid his investors’ trading losses. Godbole also agreed to an advisory industry bar for a minimum of five years and to cease and desist from future 1940 Investment Advisers Act violations. By settling, he is not denying or agreeing that he committed any wrongdoing.
Per the securities fraud charges, Godbole started to manage the Opulent Lite LP, a now failed hedge fund, in 2005. At its height, the hedge fund managed about $30 million in assets and had about 70 investors. Until 2008, Godbole invested mainly in S&P index options and short term Treasury bonds.
In February 2008, he lost about $8.3 million as a result of a number of unprofitable deals, which he did not disclose. Also, the SEC claims that Godbole told investors that the fund was valued at $28.7 million when it was actually worth $18.5 million.
In attempt to make up the financial losses, Godbole started to use what he called a “rollover strategy” that involved the opening of options positions when each monthly trading period ended. The SEC says that throughout that year, the hedge fund manager misrepresented the fund’s trading results and asset value. When he told investors in December 2008 that the fund’s asset value was more than $26 million, the asset value had actually dropped to under $14.4 million.
The SEC says that any losses for that year that Godbole did disclose were “paper losses” related to the rollover strategy and in 2008, he had the hedge fund pay his management fees based on the inflated fund value. Investors were harmed when he had the fund redeem units at an inflated value.
It wasn’t until 2009 that Godbole notified investors of the funds’ losses and actual financial state. Many investors sought to pull out. The hedge fund was liquidated by March of that year.
Related Web Resources:
SEC Charges San Francisco’s Opulent Lite Hedge Fund For Concealing Losses, Newsroom Magazine, December 1, 2010
Saratoga fund manager settles with SEC, Business Journal, December 2, 2010
If you believe that investment fraud caused you to sustain investment losses, do not hesitate to contact our stockbroker fraud law firm immediately.