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Alternative Market Briefing

SEC charges Yorkville Advisors with overvaluing AuM, exaggerating returns

Thursday, October 18, 2012

Benedicte Gravrand, Opalesque Geneva – New Jersey-based Yorkville Advisors LLC, a former $1 billion hedge fund advisory firm, and founder and president Mark Angelo and chief financial officer Edward Schinik were charged today by the U.S. Securities and Exchange Commission (SEC) with scheming to overvalue assets under management (AuM) and exaggerate their hedge funds’ reported returns.

Angelo, 40 and Schinik, 47, allegedly did so – at least since 2008 – to hide losses and increase the fees collected from investors. Apparently, they also misrepresented the safety and liquidity of the investments made by the hedge funds. The hedge funds in questions were YA Global Investments (U.S.) LP (launched in 2005) and YA Offshore Global Investments Ltd (launched in 2001). Angelo and Schinik enticed more than $280m in investments from pension funds and funds of funds. This enabled Yorkville to charge the funds at least $10m in excess fees based on the inflated values of Yorkville’s AuM.

Aberrational Performance Inquiry According to the SEC’s release , this is the agency’s seventh case arising from its own Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basi......................

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