On January 16, the Commission was awarded summary judgment against a
hedge fund, Sterling Watters Group LP (Fund), its general partners,
Sterling Watters Capital Advisors, LLC, and Sterling Watters Capital
Management, Inc., and these entities’ principal, Angelo Haligiannis
(Haligiannis). Judge Richard J. Holwell of the Southern District of
New York found that, although the Fund had been losing money since at
least 2000 and was virtually insolvent by the third quarter of 2003,
the defendants distributed fraudulent offering materials, account
statements, newsletters and marketing materials that materially
misstated the Fund’s returns and assets, including materials
indicating that the Fund had $180 million in assets, at a time when,
in fact, it had less than $170,000. The Court concluded that by early
2004, the Fund had effectively devolved into a "Ponzi" scheme.
Haligiannis pled guilty to parallel criminal charges in September
2005, but failed to appear for his sentencing in January 2006, and
currently remains a fugitive.
The Court granted the Commission’s motion for permanent injunctions
against violations of Section 17(a) of the Securities Act, Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections
206(1) and 206(2) of the Investment Advisers Act; and found the
defendants jointly and severally liable for disgorgement of
$15,635,862, plus prejudgment interest, and a civil penalty of
$15,000,000.