Regulatory Agency Freezes Assets of Investment Adviser, Principal for Siphoning Sums from Hedge Fund

Jack Humphrey, Regulatory journalist
January 28, 2011 /

The US District Court for the District of Connecticut has granted today an order allowing the Securities and Exchange Commission to freeze the assets of an investment advisory firm based in Connecticut and its principal for misusing the hedge fund in their personal transactions.

Francisco Illarramendi, principal of Michael Kenwood Capital Management LLC, “ treated his clients’ money like it was his own, diverting millions of dollars that did not belong to him,” Director of the SEC’s Boston Regional Office David Bergers said. Illarramendi, he continued, “abused his position of trust with his clients and breached his responsibilities as an investment adviser.”

The SEC’s complaint alleged that Illarramendi and the investment adviser have redirected to his bank accounts more than $53 million in hedge fund from the total $540 million in assets of investors who have put their money in Michael Kenwood Capital Management.

The commission ordered to freeze the assets of Illarramendi, in addition to other emergency relief, to bust his plan of further misappropriating and defrauding the hedge fund of his investors.

Since January 14 this year when the complaint was filed, Janet Bond Arterton has been presiding the hearings over the case of Illarramendi and Michael Kenwood Capital Management until coming up with an order today freezing their assets.

In addition to these defendants, the SEC also indicted Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP as relief defendants for taking part in the defrauded hedge fund.

The SEC sought Illarramendi and the investment adviser to disgorge their ill-gotten gains with prejudgment interest and fines. The agency has also ordered the relief defendants to disgorge the sums they took from the hedge fund, plus prejudgment interest.

 

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