SEC Goes After Hedge Fund Bosses

     MANHATTAN (CN) - The SEC on Monday brought an emergency enforcement action against two men who run unregistered Aphelion hedge funds, claiming at least one of them has gone on a spending spree with his clients' money.
     The SEC sued Vineet Kalucha, George Palathinkal, and Aphelion Fund Management LLC, in Federal Court.
     Aphelion had $8 million under management in two unregistered Aphelion hedge funds as of February, the SEC says in the complaint. The two men are the top dogs at Aphelion.
     In 2013 Kalucha altered an auditor's report to show that Aphelion was making money, though it was losing it, the SEC says in the lawsuit. Palathinkal quickly learned that Kalucha had juggled the books, then helped him distribute false information, according to the SEC.
     "Additionally, Kalucha has misused, and continues to misuse, investor funds invested into Aphelion Management," the complaint states. "Kalucha has misused a substantial portion of the proceeds for his personal benefit, including for his luxury car payments and for payment of a personal court judgment and settlements unrelated to Aphelion Management or the Aphelion Funds.
     "Kalucha and Palathinkal also have lied to prospective investors about the amount of Aphelion Management's assets under management. While Kalucha and Palathinkal told investors at various points in 2013 that Aphelion Management had $15 million in assets under management or more, in fact Aphelion Management never had more than $5 million under management at any point in 2013."
     Kalucha, 49, lives in Washington, D.C. He's the founder, managing partner and chief investment officer of Aphelion Management.
     Palathinkal, 53, lives in New York City and Singapore. He's a general partner and chief investment officer at Aphelion.
     The SEC seeks freezing of assets, disgorgement of ill-gotten gains, penalties and an injunction.