NeoMedia Technologies, Inc (NEOM)

[jonesieatl]

How did the SEC's investigation into YA end?

I haven't kept up, just wondered.

Was YA simply using fraudulently inflated values of their victim companies to entice investors into their hedge fund?

According to the Web-site of Yorkville Advisors www.yorkvilleadvisors.com it is stated that they have two offices; In London (U.K.) and in New Jersey. They are no longer in the financial district of Jersey City, N.J but have relocated to a smaller location some 15 – 20 miles west in N.J. The investment professionals many companies previously were dealing with are no longer listed on the web-site. Also from the web-site “Selected Investments” and under the “Press Releases” it appears that no investments in the U.S. are listed.

The case is still very active in the U.S. District Court for the Southern District of New York. There was a Discovery Hearing held on December 19, 2013 before Magistrate Judge Henry B. Pitman. The release of the public transcript restriction, i.e. release for the public, is set for April 3, 2014.

On December 23, 2013 Magistrate Judge Henry B. Pitman, ordered that the Defendant (Yorkville Advisors) should promptly produce certain documents that the Securities and Exchange Commission (SEC) had requested and Yorkville had objected to produce. If there were still disputes on what documents should be produced, the Judge ordered: “If the parties are unable to agree on search terms, they are directed to submit their disputes to me for resolution.” These documents include among others: “Defendants are to promptly produce all existing transcripts of testimony or interviews by any of Yorkville's managing members, officers, directors, employees, agents, accountants, attorneys, general partners or special partners of Yorkville Advisors related to investments, the management or operation of the funds or disputes with portfolio companies or investors regarding valuation of the funds' investments in portfolio companies.”
For your possible interest, I have attached two documents from the U.S. District Court:
a. Case Summary
b. CIVIL DOCKET FOR CASE #: 1:12-cv-07728-GBD-HBP
The summary of the SEC allegation can be found in an SEC Press Release dated October 17, 2012:
Quote
The Securities and Exchange Commission charged the New Jersey-based Yorkville Advisors LLC, a former $1 billion hedge fund advisory firm and two executives with scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors. The SEC alleged that Yorkville Advisors LLC, founder and president Mark Angelo, and chief financial officer Edward Schinik enticed pension funds and other investors to invest in their hedge funds by falsely portraying Yorkville as a firm that managed a highly-collateralized investment portfolio and employed a robust valuation procedure. The SEC alleged that they misrepresented the safety and liquidity of the investments made by the hedge funds, and charged excessive fees to the funds based on the fraudulently inflated values of the investments.
This is the seventh case arising from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny.
“The analytics put Yorkville front and center on our radar screen,” said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. “When we looked further we found lies to investors and the firm’s auditors as well as a scheme to inflate fees by grossly overvaluing fund assets. We will continue to pursue hedge fund managers whose success is based on fiction rather than fact.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Yorkville, Angelo, and Schinik defrauded investors in the YA Global Investments (U.S.) LP and YA Offshore Global Investments Ltd hedge funds.
The SEC alleges that Yorkville and the two executives:
• Failed to adhere to Yorkville’s stated valuation policies.
• Ignored negative information about certain investments by the funds.
• Withheld adverse information about fund investments from Yorkville’s auditor, which enabled Yorkville to carry some of its largest investments at inflated values.
• Misled investors about the liquidity of the funds, collateral underlying the investments, and Yorkville’s use of a third-party valuation firm.
The SEC alleges that by fraudulently making Yorkville’s funds more attractive to potential investors, Angelo and Schinik enticed more than $280 million in investments from pension funds and funds of funds. This enabled Yorkville to charge the funds at least $10 million in excess fees based on the inflated values of Yorkville’s assets under management.
The SEC’s complaint charges Yorkville with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. Yorkville also is charged with violating Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. Angelo is charged with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1), (2) and (4) of the Advisers Act and Rule 206(4)-8. He also is charged with aiding and abetting Yorkville’s violations of the Exchange Act and Advisers Act. Schinik is charged with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, and with aiding and abetting Yorkville’s violations of the Exchange Act and Advisers Act.
The SEC’s Aberrational Performance Inquiry is a joint effort among staff in its Division of Enforcement, Office of Compliance, Inspections and Examinations, and Division of Risk, Strategy and Financial Innovation. The SEC’s investigation was conducted by Stephen B. Holden, Brian Fitzpatrick, and Kenneth Gottlieb with the support of Frank Milewski under the supervision of Valerie A. Szczepanik and Ken Joseph. The SEC’s litigation is being led by Todd Brody.