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Matthias Knab, Opalesque for New Managers: The hedge fund industry is no stranger to controversy, but the audacity of Evan Katz, recently penalized by the SEC, has stunned many. On September 27, 2024, the SEC issued a cease-and-desist order against Katz, co-founder of Crawford Ventures Absolute Return Fund LP, after allegations of fraudulent misrepresentations in fund marketing materials. Katz was fined $202,000 for his role in misleading investors into a fund that raised over $16 million with falsified documents and unverified performance claims.
One would expect a period of quiet reflection or at least strategic retreat following such a hit. Yet, in true Katz fashion, just seven days after the SEC action, Katz was back in the spotlight, informing his network by email that he is "very pleased to advise that this week I have joined and become a Managing Director at Blockforce Capital, one of the most compelling, sophisticated and intellectually rigorous hedge funds that I ever have met in my 20 years in the industry."
Of course, also Blockforce is a "Multiple Award-Winning" (cryptocurrency) hedge fund with - according to Katz: "(A) +95% Annual Return, (B) Sharpe +1.51, (C) Sortino +5.18".
This behavior mirrors Katz's past, where even under scrutiny, he continued to market funds as if nothing had happened. His time with NIR Group in 2009 exhibited a similar pattern: promoting investment opportunities just days before the firm froze investor withdrawals. Multi million dollar fraud
According to Long Island Business News, PwC's initial cash flow reports revealed that NIR Group managing member and head portfolio manager Corey Ribotsky had charged at least $52 million in fees and expenses since the fall of 2008, despite providing no meaningful return on the investments during that time. Even more alarming, since the cash-out freeze, NIR charged $24.5 million in management fees and an additional $1.5 million in administrative expenses. Unlike most hedge funds that cover such expenses through the standard 2% management fee, Ribotsky billed extra for these charges.
Adding to the controversy, Ribotsky's collateral management firm, First Street, billed investors another $25.83 million in management fees, listing them as creditor claims. Additionally, a creditor claim of $1.77 million was recorded as an "introducing fee" to Crawford Ventures Inc. - Katz' firm. Investors were left with significant losses as Ribotsky's firm collected fees while the investments did not deliver. Up until today, Ribotsky is involved with ongoing legal battles related to his past fraudulent activities.
As to the most recent complaint against Crawford Ventures Absolute Return Fund's managers Akshay Kamboj and Dev Kamboj, the SEC said that "the millions of dollars of trading profits reported in the Historical Transactions Sheet were fictitious", "investors suffered aggregate net losses of approximately $4.1 million."
For investors, this serves as a stark reminder: due diligence isn't just about the fund's numbers but also about the integrity of those behind it. Katz's resilience in marketing may appear impressive, but for those caught in his web of misrepresentation, the financial and legal consequences can be severe. As Katz continues his promotions, industry insiders and investors alike should ask themselves: who wants to do business with a marketer whose investors already lost twice?
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