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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23387 / October 15, 2015

Securities and Exchange Commission v. Lonny S. Bernath, Civil Action No. 3:15-cv-00485 (W.D. N.C., October 13, 2015)

SEC Charges Charlotte-Based Hedge Fund Manager with Fraud

On October 13, 2015, the Securities and Exchange Commission charged Lonny Scott Bernath, a Charlotte-based hedge fund manager, with defrauding investors in three hedge funds over several years.

According to the SEC's complaint filed in the U.S. District Court for the Western District of North Carolina, between at least 2007 and 2011, Bernath, directed three funds (the "Funds") managed by his investment advisory firm to make loans to and investments in illiquid real estate and business ventures which he also managed and in which he had personally invested. The complaint also states that Bernath misrepresented these investment activities to the Funds' investors and did not disclose them until 2013. The complaint further alleges that, from 2008 to 2011, Bernath periodically wrote down the value of these investments and loans, to the detriment of the Funds' investors.

Without admitting or denying the SEC's allegations, Bernath has agreed to partially settle the case against him. The settlement is pending final approval by the court. Specifically, Bernath consented to the entry of a final judgment ordering an accounting and permanently enjoining him from future violations of Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8 thereunder of the Investment Advisers Act of 1940; Section 10(b) and Rule 10b-5 thereunder of the Securities Exchange Act of 1934; and Section 17(a) of the Securities Act of 1933. The appropriate amount of disgorgement and civil penalty, if any, will be determined by the Court at a later date upon motion by the Commission.

 

http://www.sec.gov/litigation/litreleases/2015/lr23387.htm


Modified: 10/15/2015