SEC Freezes Hedge Fund Manager's Assets

by Glen Shapiro, LawAndTax-News.com, New York

10 November 2006

The US Securities and Exchange Commission on Monday filed fraud charges against the head of several San Francisco-based hedge funds, accusing him of misappropriating millions of dollars from investors nationwide, including senior citizens.

According to the Commission, Edward Ehee defrauded investors in the Compass West Fund, Viper Founders Fund, and Viper Investments, diverting much of the money towards mortgage and car payments, vacations, and personal bank accounts.

Among other things, the Commission's complaint alleges that although the Viper Founders Fund essentially ceased operations by late 2002, Ehee was continuing to raise money as recently as May 2006, using bogus account statements and phony financial reports showing millions of dollars in non-existent fund assets to lure new investments.

The federal district court for the Northern District of California issued an order Wednesday morning freezing the assets of Ehee, the investment advisory firms he controls, and the funds, as well as the assets of Ehee's wife, brother, and father, all of whom received thousands of dollars of investors' money from Ehee.

Helane Morrison, District Administrator of the SEC's San Francisco District Office, explained that:

"Ehee preyed on innocent investors, ranging from a neighbor who entrusted Ehee with his children's money to a senior who liquidated her life savings to invest in Ehee's funds. Today's court action confirms the willingness of the Commission to take emergency action where necessary to protect investors."

The Commission's complaint charges Ehee and his management firms, Compass Fund Management and Viper Capital Management, with violating the antifraud and other provisions of the federal securities laws and seeks permanent injunctions prohibiting future violations of the securities laws, and accounting, disgorgement, and civil penalties.

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