On Wednesday, the US Securities and Exchange Commission (SEC ) said that it had filed fraud charges against EIA All Weather Alpha Fund I Partners LLC and its owner, Andrew M. Middlebrooks, for allegedly engaging in a multi-year scheme that included the misappropriation and misuse of investors’ funds.
On 19 May, the SEC requested, and the US District Court in the Eastern District of Michigan granted emergency relief from the court, including a temporary restraining order against EIA and Middlebrooks and an asset freeze against the defendants and named relief defendants.
Case Background
From at least mid-2017 to April 2022, according to the SEC’s unsealed complaint, EIA and Middlebrooks misled investors in their hedge fund, EIA All Weather Alpha Fund I LP, by making false statements about the fund’s performance and total assets, providing false investor account statements, misrepresenting that the fund had an auditor, as well as creating and disseminating a fake audit opinion.
Additionally, the SEC’s complaint alleges that EIA and Middlebrooks misused new investor money to make Ponzi-like payments to other investors in order to deceive investors into believing that the fund was profitable. According to the complaint, Middlebrooks misappropriated investor funds for personal use, including payments for jewellery and credit cards.
Moreover, Middlebrooks is charged in the SEC’s complaint, which was filed in the Eastern District of Michigan, with aiding and abetting EIA’s violations of the Investment Advisers Act. EIA and Middlebrooks are being sued by the SEC for injunctions, disgorgement of ill-gotten gains with prejudgment interest and financial penalties.
“As we allege in the complaint, Middlebrooks lured investors by touting extraordinary performance returns and then concealed the truth of his fraud, including by fabricating documents provided to investors. Our swift action is intended to protect investors from future harm,” C. Dabney O’Riordan, the Co-Chief of the Asset Management Unit at the US SEC, commented.
