U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23275 / June 3, 2015
Securities and Exchange Commission v. ClearPath Wealth Management, LLC, Patrick Evans Churchville, ClearPath Multi-Strategy Fund I, L.P., ClearPath Multi-Strategy Fund II, L.P., ClearPath Multi-Strategy Fund III, L.P., and HCR Value Fund, L.P., Civil Action No. 15-cv-00191-S-LDA
Federal Court Imposes Preliminary Injunction and Asset Freeze on Rhode Island-Based Adviser
The Securities and Exchange Commission today announced that on June 2, 2015 the federal court in Rhode Island entered an order imposing an asset freeze and other preliminary relief against the defendants ClearPath Wealth Management, LLC, a private funds investment adviser, its president and owner, Patrick Churchville, and the relief defendants ClearPath Multi-Strategy Fund I, L.P., ClearPath Multi-Strategy Fund II, L.P., and ClearPath Multi-Strategy Fund III, L.P. (Multi-Strategy Funds). The Commission filed charges on May 8, 2015 against ClearPath and Churchville as defendants for operating a fraudulent scheme that the SEC alleges resulted in at least $11 million in losses to investors. The Multi-Strategy Funds and the HCR Value Fund, L.P. were named as relief defendants.
According to the SEC's complaint, from at least December 2010, ClearPath and Churchville diverted deposits from new investors to pay prior investors, used proceeds from selling particular investments to pay unrelated investors, used investors' funds as collateral for loans to make investments for their own benefit, used other investors' money to repay the loans, converted investor funds into investments for ClearPath's own benefit, and stole $2.5 million of investor funds to purchase Churchville's waterfront home in Barrington, Rhode Island. The complaint alleges that Churchville and ClearPath used a variety of deceptive acts and misleading accounting tricks to conceal their fraud, and then prolonged the scheme by lying to investors about the status, worth, and disposition of those investments.
ClearPath, Churchville, and the Multi-Strategy Funds consented to the entry of an asset freeze and other preliminary relief. In addition to the asset freeze, the court prohibited ClearPath and Churchville from soliciting, accepting, or depositing any client funds, or from exercising any discretionary authority over clients' accounts. ClearPath and Churchville were also preliminarily enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-2, 206(4)-7, and 206(4)-8 thereunder.
According to the complaint, the SEC seeks to require ClearPath and Churchville to pay civil monetary penalties, and for all defendants and relief defendants to return their allegedly ill-gotten gains with interest. The SEC also seeks permanent injunctions against both ClearPath and Churchville.
For further information, please see Litigation Release No. 23255 (May 8, 2015). The SEC's investigation is continuing.