NEWARK, NJ – A South Carolina investment fund manager today admitted his role in a scheme to fraudulently get more than $ 20 million from investors through false statements about the fund’s trading strategy and performance, the company announced. US interim prosecutor, Rachael A. Honig.
George Heckler, 64, from Charleston, South Carolina, pleaded guilty by videoconference to US District Judge Madeline Cox Arleo for information that accused him of a securities fraud charge.
According to the documents filed in this case and statements made in court:
Heckler managed, controlled or was involved with several investment funds, including Conestoga Partner Holdings (Conestoga), Cassatt Short Term Trading Fund LP (Cassatt), CV Special Opportunity Fund LP (CVSO) and TA1 LLC (TA1).
From 2014 to 2018, Heckler falsely declared to investors that he would invest his funds in specific trading strategies. Instead, he diverted his funds from Cassatt and TA1 for purposes incompatible with trading strategies, including paying millions of dollars to other investors. Heckler also used investor funds to cover investment losses suffered by other funds under his management and / or control.
Heckler requested investments from Victim-1, claiming that the investments would be invested in Cassatt, which employed a “first loss” trading strategy designed to protect investors against losses. However, as of December 2013, Cassatt no longer had the necessary brokerage account to employ the represented trading strategy. Although Cassatt no longer has a brokerage account, in 2014, Heckler represented to Victim-1 that Cassatt was still involved in a first-loss trading strategy and requested that Victim-1 invest in Cassatt. In September 2014, Victim-1 invested approximately $ 9.1 million in Cassatt, relying on Heckler’s representation that Victim-1’s money would be invested in accordance with Cassatt’s initial loss trading strategy. Heckler used $ 4.6 million of Victim-1’s investment to repay existing investors and the remainder to meet other obligations that Heckler owed and not related to Cassatt.
Heckler also approached Victim-2 about the possibility of creating a hedge fund that would use capital for first loss operators, which would serve as “first loss” protection for investors’ capital. At the end of 2015, Victim-2 formed a hedge fund, using the concept proposed by Heckler (Entity-1). In 2015 and 2016, Entity-1 invested $ 10.1 million in TA1 through a participation agreement that stated that Entity-1’s investment would be used for an “arbitrage recapture negotiation of option arbitration”, also known as “skateboard trading”. In fact, no Entity-1 investments were used for the “skate trade”. Entity-1’s investment was used for other purposes, including reimbursing others who had previously invested in Heckler.
Throughout the scheme, Heckler sent statements to investors that led them to believe that the value of their investments was increasing, when, in fact, the value was decreasing. Heckler received approximately $ 1 million in fees and distributions from fraudulently obtained investments for his personal use.
Counting securities fraud carries a maximum sentence of 20 years in prison and a $ 5 million fine. The sentence is scheduled for July 15, 2021.
The United States Securities and Exchange Commission filed a civil lawsuit against Heckler based on allegations underlying the allegation of securities fraud.
United States Attorney Honig gave credit to FBI special agents, under the direction of Special Agent Responsible Michael J. Driscoll, of the Philadelphia Field Office, with the investigation that led to the prosecution.
The government is represented by assistant attorneys Catherine R. Murphy and Andrew Macurdy of the Criminal Division of the United States Public Prosecutor’s Office.