U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19979 / January 24, 2007
SEC v. HMC International, LLC., et al., Civil Action No. 05 CV 10673 (DC) (S.D.N.Y.)
SEC Settles Action Against Hedge Fund, HMC International, LLC, and Its Principals, Robert M. Massimi and Bret A. Grebow
The Securities and Exchange Commission announced today that the United States District Court for the Southern District of New York entered final judgments on consent against HMC International, LLC ("HMC" or the "Fund"), Robert M. Massimi, and Bret A. Grebow, resolving the civil action brought by the Commission to halt an ongoing fraud Massimi and Grebow orchestrated through HMC, a fraudulent hedge fund. The Court also entered a final judgment resolving the Commission's claims against the relief defendant, Jaime Elliott.
The Commission's complaint alleged that from late 2001 to September 2005, Massimi, the Fund's manager, and Grebow, the Fund's trader, conducted a fraudulent offering of investments in HMC and misappropriated assets of the Fund. The Commission alleged that Massimi and Grebow materially misrepresented the Fund as a pooled investment vehicle that engaged in "low risk" day trading, and that Massimi falsely assured investors that he was a hands-on manager, who maintained diligent oversight of the Fund's assets and trading. In fact, Massimi and Grebow were sending investors false monthly account statements that portrayed their investments as profitable when, in reality, Grebow was systematically looting the Fund's trading account and Massimi was using new investor money to redeem investments and pay profit distributions in order to conceal the fraud. Throughout the period the Fund was operating, Massimi and Grebow benefited from lucrative "profit" distributions based on fictitious brokerage account statements. The Commission further alleged that as Massimi faced increasing investor concerns about the Fund's legitimacy and government inquiries into his misconduct, he diverted assets to Elliott to shield them from investors and government authorities.
Without admitting or denying the Commission's allegations, the defendants have consented to the entry of final judgments permanently enjoining defendants HMC, Massimi and Grebow from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and defendants Massimi and Grebow from future violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940; Massimi has consented to pay $1,266,168 in disgorgement, $69,984 in prejudgment interest and a $120,000 civil penalty; and Grebow has consented to pay $2,467,472 in disgorgement, $517,595.77 in prejudgment interest and a $120,000 civil penalty. The relief defendant, Elliott, has consented to relinquish a brokerage account wrongfully transferred to her name.
Today, the Commission also issued orders, on consent, in administrative proceedings against Massimi and Grebow barring them from association with any investment adviser. Massimi and Grebow consented to the issuance of the Orders without admitting or denying the Commission's findings, except to admit the entry of final judgments against them in the civil action permanently enjoining them from future violations of the federal securities laws.