SEC And Manhattan DA Investigate Southridge Capital
Nathan Vardi, 07 October 2009
Southridge Capital Management, a Ridgefield, Conn., hedge fund firm run by Stephen Hicks that primarily employs an investment strategy known as PIPEs, is under investigation by the Securities and Exchange Commission and Manhattan District Attorney Robert Morgenthau.
The SEC has opened an investigation into Southridge, according to two subpoenas the SEC sent in late July to companies that had received financing from the firm’s hedge funds.
In the five-page subpoenas, Vyta Corp. and Hyperdynamics Corp., two micro-cap companies that have been fighting Southridge for years in court, were asked by the SEC to produce documents reflecting all transfers of cash between them and the Southridge hedge funds over a four-year period. The companies were also told to provide documents relating to securities they issued to Southridge and communications between the companies and Southridge.
Late last week, the Ridgefield Police Department searched Southridge’s offices, executing a search warrant on behalf of Morgenthau. The search was first reported by Bloomberg News.
“Our department assisted the Manhattan district attorney’s office,” said Ridgefield Police Captain Steven Brown. A Manhattan DA spokesperson declined to comment. An SEC spokesperson neither confirmed nor denied the existence of an investigation.
In an e-mailed statement, Southridge Capital Management says: “We are cooperating fully with authorities and cannot provide any further information at this time.”
