The Securities and Exchange Commission (“SEC”) and a private investor, Chirag Amin, have initiated lawsuits against a Tampa-based investment adviser, its principal, and an unregistered hedge fund.
In an action filed in the United States District Court for the Southern District of Florida, the SEC formerly charged OM Investment Management, LLC (“OM Management”), its principal, Gignesh Movalia, and its director of investments, Edwin Gaw, a Massachusetts resident, with making material misrepresentations and omissions to investors in connection with the hedge fund, OM Global Investment Fund, LLC (“OM Global”). In addition, an investor, Chirag Amin, filed a state court action in Miami-Dade circuit court naming Gignesh Movalia and OM Global as defendants. Gignesh Movalia is a resident of Land O’ Lakes, Florida.
The SEC’s complaint alleges that OM Management, through Movalia and Gaw, made material misrepresentations and omissions to potential investors concerning OM Global’s holdings, the identity of OM Global’s auditor, and OM Global’s registration status. The SEC also alleged that OM Management did not accurately disclose OM Global’s participation in related party transactions, misappropriated investors’ investments, falsified documents, and violated the federal securities laws governing investment advisers.
According to the SEC, OM Management, Movalia, and Gaw consented to the entry of judgments enjoining them from further violations of securities laws, freezing their assets, preventing the destruction of documents, and requiring them to provide an accounting. Movalia and Gaw also agreed to Orders barring them from associating with any securities or investment advisory firms.
In the Miami-Dade court matter, the Court has appointed a corporate monitor, James Sallah, because it was alleged that OM Global was mismanaged. According to the corporate monitor’s website, he is working to locate and discover funds and assets for the benefit of all investors.
InvestmentNews reports that Sallah’s goal is to recover as much money as possible to equalize the payments to all investors in OM Global. According to InvestmentNews, OM Global largely invested investors’ funds in the Facebook IPO. When the Facebook stock fell in price in late 2012, Movalia allegedly sold all and realized a loss of $7 million. Allegedly, Movalia used the Facebook loss to cover up his wrongdoing such as the misappropriation of investors’ funds and the improper loans to other entities. Attorneys for the corporate monitor claim that Movalia told investors that OM Global still held the Facebook stock even after the sale. InvestmentNews reports that OM Global lost $9 million of the $14 million raised from investors.
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