Massachusetts Secretary of the Commonwealth William Galvin has filed a securities fraud complaint against MC2 Capital. The state regulator is accusing the Boston-area hedge fund of running a Ponzi scam involving three hedge funds: the MC2 Capital Partners Fund, the MC2 Capital Value Partners Fund, and the MC2 Canadian Opportunities Fund. Alleged victims included a local institutional investor that invested $2M.
Galvin has taken action to bar the three MC2 Capital funds along with their fund operator Yasuna Murakami, from engaging in further securities business in Massachusetts. Murakami purportedly took more than $15M from over 45 investors.
He allegedly used investors’ money pay for luxury hotels, alcohol, specialty cars, and other personal expenses. The MC2 Capital Partners Fund, which was the original fund and founded in 2007, was marketed primarily to friends and family. Within a year of operation, however, the fund’s balance was negative and investors’ equity was erased.
Meantime, contends Galvin, Murakami and the entities tried to conceal the losses by offering investors misleading and false performance numbers. The second fund, the MC2 Capital Value Partners Fund, followed a similar trajectory toward failure as the first fund.
Murakami also is accused of misappropriating funds from the Canadian fund, the MC2 Capital Canadian Opportunities Fund, which MC2 Capital was involved in with Toronto-based firm Donville Kent Asset Management. By last year, however, the latter had severed ties to MC2 and its entities. Murakami allegedly took investor funds from the Canadian MC2 fund to pay redemptions or returns to investors who had invested in the other two MC2 funds.
Galvin contends that since 2011, less than $6M has been returned to investors of the MC2 funds. He is seeking to pay back investors for their losses, an administrative fine, and disgorgement of all profits. In a statement, Galvin said that the securities case against M2Capital and Murakami was a “classic example” of a “shell game” that involved transferring funds from one investor to another while enticing sophisticated investors with the promise of high returns.
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