It may not amount to the multibillion-dollar investment schemes orchestrated by Madoff or Stanford, but the SEC has filed a complaint against another investment manager.
The SEC today charged Westgate Capital Management and its managing member, James Nicholson, for defrauding hundreds of investors out of millions of dollars. The civil complaint, filed in federal court in Manhattan, alleges that Nicholson and the Pearl River, N.Y.-based firm swindled millions from current and prospective investors in 11 separate hedge funds managed by Westgate.
According to the complaint, Westgate hid losses from investors, and solicited new investors with marketing materials that falsely claimed the hedge funds were successful. The SEC also alleges that Nicholson, 42, created a bogus accounting firm and provided some investors with fake audited financial statements.
The SEC is now seeking a court order to freeze the assets of both Westgate and Nicholson. In a statement, Scott Friestad, deputy director of the SEC’s Division of Enforcement, said the SEC was able to pursue the case, thanks to “information obtained through a complaint from a member of the public who was suspicious of Westgate’s rosy claims.”
The U.S. Attorney’s Office for the Southern District of New York is pursuing criminal charges against Nicholson.
Ira Sorkin, a partner in Dickstein Shapiro’s New York office, is representing Westgate and Nicholson. He did not immediately return a call for comment.
Sorkin says he is reviewing the criminal complaint and the SEC complaint, but did not offer comment beyond that.