Securities Law Updates | New Settlements and Verdicts

April 28, 2009

MA District Court Enters $2.91M Final Judgment Against UK Fund Manager for $ 34M Securities Fraud

SEC v. Lydia Capital, LLC et al.
No. 07-CV-10712-RGS, U.S. District Court for the District of Massachusetts, 4/8/2009

MA District Court Enters $2.91M Final Judgment Against UK Fund Manager for $ 34M Securities Fraud

Holding:

The U.S. District Court for District of Massachusetts has entered a final judgment on April 8, 2009 against defendant Glenn Manterfield, a citizen of the United Kingdom, in connection with a civil injunctive action filed in April 2007 by the Securities and Exchange Commission (“SEC”) against Manterfield, his business partner Evan K. Andersen, and Lydia Capital, LLC, a registered investment adviser based in Boston, Massachusetts. The judgment enjoined Manterfield, a principal of Lydia, from engaging in future violations of the antifraud provisions of the federal securities laws and holds him liable for $2,350,000 in disgorgement of profits from the conduct alleged in the SEC's complaint, plus prejudgment interest of $425,998, and a civil penalty in the amount of $130,000.

Detailed Summary:

The SEC originally filed its action against Manterfield on April 12, 2007 in the district court, and filed an amended complaint on May 1, 2007. The amended complaint alleged that from June 2006 through April 2007, Manterfield and his business partner Andersen, acting through Lydia, engaged in a scheme to defraud more than 60 investors, who invested approximately $34 million in Lydia Capital Alternative Investment Fund LP, a hedge fund managed by Lydia.

The amended complaint alleged that defendants told investors that they intended to use the hedge fund’s assets to acquire a portfolio of life insurance polices in the life settlement market. According to the amended complaint, Manterfield, Andersen, and Lydia made a series of material misrepresentations and omissions, including: (1) materially overstating, and in some instances completely fabricating the hedge fund’s performance; (2) inventing business partners, offices, and investors in an attempt to legitimatize the firm and concealing the truth as to why key vendors and banks ceased relationships with the defendants; (3) lying about Manterfield’s significant criminal history, and failing to disclose a February 2007 criminal asset freeze against him in England; (4) lying about how the hedge fund planned to address certain material risks and failing to disclose others; and (5) misstating the nature of the hedge fund’s assets and its investment process.

In addition, the amended complaint stated that Manterfield and Andersen took millions of dollars of investors’ funds by withdrawing investor monies to which they were not entitled.

On April 12, 2007, the district court issued a temporary restraining order that, among other things, froze the three defendants’ assets. On May 3, 2007, the district court issued a consented-to preliminary injunction and ordered a continuation of an asset freeze of the defendants’ assets.

In a related action in the United Kingdom, on February 29, 2008, the SEC filed a limited notice application with the High Court of Justice, Queen’s Bench Division seeking an emergency order freezing approximately $1 million in assets held by Manterfield in the United Kingdom. The SEC filed the application after learning that a separate freeze order previously obtained by British authorities against Manterfield’s assets might be lifted. After a hearing on the Commission’s application on February 29, 2008, the High Court of Justice issued an order freezing the assets until March 6, 2008. Manterfield consented to continue the freeze until the court held an evidentiary hearing to determine whether the freeze should be extended. An evidentiary hearing was held in the High Court of Justice on April 30, 2008 and May 1, 2008. On May 16, 2008, the High Court of Justice issued an order continuing the freeze of Manterfield’s assets until the resolution of the SEC’s pending enforcement action in the United States. Manterfield appealed the order to the Supreme Court of Judicature Court of Appeal. On November 26, 2008, the Court of Appeal held a hearing and, on January 28, 2009, the three-judge panel unanimously dismissed Manterfield’s appeal. See http://www.sec.gov/litigation/litreleases/2009/lr20993a.htm.

Companies Mentioned

Lydia Capital, LLC

Securities and Exchange Commission

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Companies Mentioned

Securities Law

The following companies are mentioned in Securities Law Updates:

Securities and Exchange Commission

Harris Associates, L.P.

Banc of America Securities LLC

Citicorp USA, Inc.

The Public Employees’ Retirement System of Mississippi

Morgan Stanley & Co., Inc.

Jan Charles Finance S.A.

Park East, Inc.

CIBC World Markets Corp.

Citigroup Inc.

Barclays Capital Inc.

Citigroup Global Markets, Inc.

Consolidated Leasing Hugoton Joint Venture #2

Buchanan Ingersoll & Rooney Professional Corporation

Consolidated Leasing Anadarko Joint Venture

W. R. Huff Asset Management Co., LLC

ABN AMRO Bank N.V.

Guardian Capital Management

Free Enterprise Fund

Banc of America, N.A.

Vesta Insurance Group, Inc.

Beckstead and Watts, LLP

Barclays Bank PLC

Torchmark Corp.

Public Company Accounting Oversight Board

BNY Capital Markets, Inc.

KPMG Peat Marwick, LLP

Deloitte & Touche LLP

Credit Lyonnais Securities (USA) Inc.

Florida State Board of Administration

Credit Suisse Securities (USA) LLC

Deutsche Bank AG

The Cleaners & Caulkers Local 1 Pension Fund

Credit Suisse, New York Branch

Ameriprise Financial, Inc. f.k.a. American Express Financial Corp.

Harris Nesbitt Corp.

California Department of Corporations

The Royal Bank of Scotland plc

RiverSource Investments, LLC

Asset Management Holding AG

Deutsche Bank

Consolidated Management Group, LLC

The Bank of Nova Scotia

Alex Brown, Inc.

Toronto Dominion Texas, LLC f.k.a. Toronto Dominion Texas, Inc.

SG Cowen Securities Corp.

Tellabs, Inc.

Deutsche Bank Securities, Inc.

Mizuho International PLC

Lydia Capital, LLC

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