September 30, 2014

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September 29, 2014

Former Hedge Fund Founder Ordered to Pay $5 Million for Securities Law Violations

The US District Court for the Southern District of New York recently ordered the investment adviser to two hedge funds, and its managing director, to pay nearly $5 million in disgorgement, prejudgment interest and civil penalties for violations of the federal securities laws. Defendant Chetan Kapur, through his company ThinkStrategy Capital Management, LLC, induced investors into buying shares in two hedge funds he managed by making misstatements about the hedge funds’ past and present performance, their assets, longevity, and other material misrepresentations. Defendants subsequently entered into consent judgments with the Securities and Exchange Commission and the court, and agreed to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and civil penalties. The SEC requested disgorgement in the amount of $3.25 million; the approximate profits derived from the violations. The court rejected defendant’s’ argument that any legitimate business expenses should be deducted from this amount on the grounds that Kapur commingled business and personal expenses and did not maintain any books and records that distinguished between these expenses. On this basis, the court: (i) approved the entire amount of disgorgement requested by the SEC, (ii) approved over $700,000 in prejudgment interest, and (iii) granted the SEC’s request for third-tier civil penalties, the most severe level available.

Securities and Exchange Commission v. Kapur, LILABOC, LLC d/b/a/ ThinkStrategy Capital Management, LLC, 11 Civ. 8094 (PAE) (S.D.N.Y. Nov. 29, 2012).

©2014 Katten Muchin Rosenman LLP

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About this Author

Michael S. Gordon, Katten Muchin Law Firm, Litigation Attorney
Partner

Michael S. Gordon has a broad range of commercial litigation experience, and regularly represents clients in state and federal courts, as well as in arbitration and mediation proceedings, in New York, New Jersey and throughout the United States. Mr. Gordon has substantial experience in real estate and secured lending litigation, representing developers, management and hospitality companies, banks and private equity funds. Mr. Gordon also has extensive experience handling all types of business disputes including breach of contract, business torts, partnership and corporate shareholder...

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Elizabeth D. Langdale, Litigation Attorney, Katten Muchin Law Firm
Associate

Elizabeth D. Langdale concentrates her practice in litigation and dispute resolution matters.

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