"SEC Charges Prophecy Asset Management, its CEO/CIO, and Largest Sub-Adviser in $500 Million Advisory Fraud"

Ummm, wasn't the name itself something of a tip-off?

From the Securities and Exchange Commission, September 29:

The Securities and Exchange Commission today announced charges against New York-based Prophecy Asset Management LP as well as its CEO and Chief Investment Officer Jeffrey Spotts, and its largest sub-adviser Brian Kahn, for their roles in a multi-year fraud that concealed hundreds of millions of dollars of losses from investors while bringing in millions in management and incentive fees.

According to the SEC’s complaint, Prophecy Asset Management raised over $500 million between 2014 and 2020 for hedge funds it advised, misleading investors to believe that their investments were protected from loss. The complaint alleges that Prophecy Asset Management and Spotts told investors that the funds’ capital was allocated among dozens of sub-advisers who traded in liquid securities and posted cash collateral to offset any trading losses they incurred. In reality, according to the complaint, most of the funds’ capital went to Kahn, who incurred massive trading losses that far exceeded the cash collateral he had contributed. As alleged, Prophecy Asset Management, Spotts, and the company’s Chief Compliance Officer, John Hughes, worked with Kahn to deceive the funds’ auditor and administrator – and, in turn, investors – through fabricated documents and engaging in a series of sham transactions to cover-up the true financial condition of the funds. According to the complaint, by March 2020, after losses in the funds exceeded $350 million, Prophecy Asset Management indefinitely suspended redemptions by investors....

....MUCH MORE 

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