SEC – NY AG Halt Fraudulent Investment Scheme

The SEC teamed last week with the New York AG to halt an on-going investment fund fraud run by a Pakistani citizen residing in New York. The SEC obtained a freeze order. The NY AG filed criminal charges and arrested the claimed fraudster. SEC v. Malik, Civil Action No. 15-1025 (S.D.N.Y. Filed February 13, 2015).

Defendant Mozzam Malik, who registered with FINRA as a stock broker trainee in 2007, was formerly a waiter, NYPD traffic agent and security guard who attended high school in Pakistan. His company, defendant American Bridge Investment Group, LLC, has not had a physical office since 2011. It has had several names including Wall Street Creative Partners, LP and Seven Sages Capital, LP. Presently the company is doing business as Wolf Hedge LLC.

Since at least May 2011 Mr. Malik has solicited investors for his hedge fund. Many of the solicitations were made by unpaid staff who cold called potential investors. Potential investors were promised a partnership interest in Mr. Malik’s hedge funds. Those funds, investors were told, held a multi-million dollar portfolio of investments in various high profile IPOs and secured bond transactions. At times an offering memoranda was used which claimed the fund had a valuation of over $100 million. At other times e-mail was used to solicit investors. For example, one e-mail contained a screen shot showing the value of the fund at $56 million. The promised returns were represented as being very high. The profits came from a proprietary, quantitative approach to investing combined with sophisticated risk-control techniques. All of this was supposedly supervised by Mr. Malik who, according to the website, had over a decade of Wall Street experience and had lead teams which managed over $5 billion.

When investors complained they were contacted by Amanda Ebert, Investor Relations for the fund. The e-mail contained a photograph of Ms. Ebert. Account statements for the investor were attached which depicted significant investment returns.

The claims were false, according to the SEC and the NY AG. While about $840,774 was raised from investors, the fund never held much more than $90,000. The balance of the investor funds were misappropriated by Mr. Malik, according to the court papers. Ms. Ebert does not exist, although the photograph was of a real person. The lady in the photograph had no knowledge of Mr. Malik or his operation.

The Commission’s complaint alleges violations of Securities Act Sections 5(a) and 5(c) and 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1), (2) and (4). See Lit. Rel. No. 23197 (February 13, 2015). The case is pending.

NY indictment charges two counts of grand larceny in the second degree, three counts of grand larceny in the third degree, seventeen counts of forgery in the second degree, five counts of securities fraud under the Martin Act and one count of scheme to defraud in the first degree. Mr. Malik was arraigned on Friday, February 13, 2015. He is being held on a $ 1 million bond over $1 million cash bail.

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