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Alternative Market Briefing

SEC orders Greenwich hedge fund AlphaBridge Capital to pay $5m, close office over fraud

Thursday, July 02, 2015

Komfie Manalo, Opalesque Asia:

The U.S. Securities and Exchange Commission (SEC) on Wednesday accused Greenwich, Connecticut-based AlphaBridge Capital Management and its owners Thomas T. Kutzenand and Michael J. Carino with fraudulently inflating the prices of securities in hedge fund portfolios they managed and ordered them to pay $5 million to settle the charges.

Kutzen and Carino have agreed to pay the $5 million penalty and to close the hedge fund, the SEC said in a statement.

SEC investigators said they found that AlphaBridge had told investors and its auditor that it obtained independent price quotes from broker-dealers for certain unlisted, thinly-traded residential mortgage-backed securities. AlphaBridge instead gave internally-derived valuations to broker-dealer representatives to pass off as their own. The inflated valuation of these assets caused the investors to pay higher management and performance fees to AlphaBridge.

"The integrity of the portfolio valuation process is critical to fund investors, especially when it involves illiquid securities," said Julie M. Riewe, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. "AlphaBridge claimed to use market-grounded price quotes from brokers when in fact it relied on its own rosy view of market conditions to price its portfolio."

The SEC separately ch......................

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