SEC Announces Judgment Against Stephen Hicks, Southridge Capital Management, Southridge Advisors
Fitapelli and Kurta, 15 March 2018
A Securities and Exchange Commission release published on February 15, 2018 states that the SEC has obtained “final judgments” against a Stephen Hicks, a hedge fund manager based in Ridgefield, Connecticut, as well as his investment advisory firms. According to the release, a Connecticut federal court ordered the defendants “to pay nearly $13 million in disgorgement and penalties” following the court’s prior determination that they had engaged in the unlawful diversion of investor funds “for use by other hedge funds that were illiquid and in need of cash.”
The release states that the court had previously found Mr. Hicks and his businesses, Southridge Capital Management and Southridge Advisors, “liable on the SEC’s claim” that they participated in the misappropriation of investor funds. Investors were allegedly “defrauded” when they were not told about the transfers of assets during the time the transfers took place, according to the SEC, which states also that Mr. Hicks “sent a letter to investors admitting that legal and administrative expenses had been improperly allocated between funds,” and that instead of repaying the funds, he transferred illiquid securities to them. The judgments issued against him and his businesses enjoin them from further violations and require the payment of a previously ordered $7,864,064 in disgorgement and prejudgment interest. Mr. Hicks has also been ordered to pay a penalty of $5 million.
