Hedge fund Quantek Asset Management, former Quantek executives Javier Guerra and Ralph Patino, and the firm's one-time parent agreed to pay more than $3.1 million to settle SEC charges that they misled institutional investors in the Quantek Opportunity Fund.
In an announcement Tuesday, the SEC claimed Quantek executives misled investors as to how much management had invested their own money in the fund, the rigor of the investment review process, and related-party loans made by the fund to Quantek affiliates.
The executives also are barred from the securities industry, Mr. Guerra for five years and Mr. Patino for one year. Fund executives settled without admitting or denying the charges.
The fund, which had more than $1 billion in assets in mid-2008, started liquidating in 2009. Montieth Illingworth, a spokesman for Mr. Guerra, said the overwhelming majority of investors were institutional.
Launched in July 2005, the Quantek Opportunity Fund, comprising a master fund and two feeder funds, financed Latin American industrial and real estate ventures. Former Quantek parent Bulltick Capital Markets and Mr. Guerra served as investment adviser to the fund from December 2006 until September 2011. Mr. Patino was director of operations at Quantek.
According to the SEC, Quantek misrepresented in due diligence questionnaires and side letter agreements with investors from 2006 to 2008 that its principals had invested their own money. “In fact, none had ever invested their own wealth,” the SEC states. “These misrepresentations provided a significant marketing benefit.”
In 2006 and 2007, Quantek officials made related-party loans to affiliates of Mr. Guerra and Bulltick without proper disclosure, according to the SEC. “The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser's conflicts of interest,” Scott Weisman, assistant director in the SEC Enforcement Division's Asset Management Unit, said in an SEC statement.
Quantek also repeatedly failed to follow the robust investment approval process it had described to investors, Mr. Weisman said.
Mr. Guerra, who resigned from the funds in October 2011, said in a statement that more than $260 million has been returned to investors, 80% of whom supported the liquidation plan. “I am gratified for what we were able to accomplish for investors,” Mr. Guerra said.
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