The Securities and Exchange Commission moved Friday to freeze the assets of three Pennsylvania-based cryptocurrency funds that it claimed bilked investors out of “tens of millions of dollars.”
Unsealing its complaint against brothers Sean Hvizdzak and Shane Hvizdzak, and their associated businesses, Hvizdzak Capital Management, High Street Capital, and High Street Capital Partners, the SEC claimed they had lied to investors and misappropriated funds.
The SEC also filed to secure a court order freezing the three funds’ assets and halting their operations. Further, the court ordered an accounting, expedited discovery, as well as prohibiting the destruction of documents.
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Explaining the background, the SEC says the two brothers raised funds from investors by misrepresenting their business performance and regulatory status. In addition, Hvizdzaks offered their clients fake financial statements and forged audit documents.
The complaint further alleges that the fraudsters claimed in their marketing materials that the fund earned 100.77% and 92.90% during the third and fourth quarters of 2019, when in fact they lost money in those quarters. In addition, some of the money never went toward digital asset investments. Instead, the brothers diverted tens of millions of dollars from the fund to their personal accounts at banks and crypto exchanges.
The case isn’t the SEC’s first against a fund managing crypto assets and marks an extension of its regulatory crackdown from cryptocurrencies to those investing in them. Since cryptocurrencies rose to prominence over the past couple of years, many crypto funds have emerged in order to attempt to capitalize on the new interest in the space.
“As alleged in our complaint, the Hvizdzaks touted exceptional, but false, performance to potential investors when offering their fund. Investors should be skeptical of claims that seem too good to be true said Adam S. Aderton, Co-Chief of the SEC’s Asset Management Unit.