Duo allegedly inflated success of investment strategies.
By Deepak Chitnis
WASHINGTON, DC: Vineet Kalucha, the Chief Investment Officer at New York’s Aphelion Fund Management, is facing charges of fraud from the Securities and Exchange Commission (SEC).
According to a press release issued by the SEC, Kalucha and another Indian American employee at Aphelion, Chief Financial Officer George Palathinkal, were jointly responsible for a scheme that over-valued the success of their investment strategies in order to inflate confidence among investors.
The complaint specifically lists Kalucha, Palathinkal, and Aphelion Fund Management as a whole. The SEC alleges that Kalucha has been using an investment model he himself designed since 2009, saying that the value of the investment fund grew by around 30% over 18 months even though it actually depreciated by 3% over 15 months.
All three parties also allegedly lied about the amount of assets Aphelion had to its name. They claimed that the company had at least $15 million in assets, when in reality, the company “never had more than $5 million in assets under management at any point during [2013].”
“We allege that on multiple occasions, Aphelion, Kalucha, and Palathinkal intentionally overstated the success of their investment strategy,” said Robert J. Burson, associate director of the SEC’s Chicago Regional Office. “Kalucha also has been using investor money as his own, and emergency action was necessary to protect the interests of investors.”
These activities specifically violate the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940.
Kalucha has had his assets frozen until further notice as the SEC continues its investigation. Additionally, the SEC has requested emergency relief for all investors who money was involved with the fraudulent scheme, and a temporary restraining order has been filed to prohibit Kalucha and any accomplices from soliciting new investors for money.
A hearing regarding the SEC complaint will be heard on May 15. The complaint was filed in the US District Court for the Southern District of New York, the jurisdiction overseen by Indian American attorney and financial crime guru Preet Bharara.
Palathinkal was absolved of the charges by the SEC.
(This story was updated on July 9, 2015, to insert the new information that charges against George Palathinkal was absolved by the SEC.)