MANHATTAN (CN) – James C. Dawson ran his unregistered hedge fund, Victoria Investors, by “cherry-picking” profitable trades for his own account, spent clients’ money on his personal expenses, and paid his wife $662,000 in “salary,” though she didn’t work at the firm, the SEC says in Federal Court.
Dawson, 53, of Rye, N.Y., “cherry-picked profitable trades for his own account,” the SEC says. “Dawson did this by purchasing securities throughout the day in a suspense account and delaying allocation of the transactions until later in the day, after he saw whether the securities appreciated in value. Dawson then disproportionately allocated profitable trades to his personal account and unprofitable trades to his advisory clients.”
In hundreds of trades for more than 4 years, Dawson made money on 98.3% of the trades in his own account, but only on 51.7% of the trades in Victoria Invertors’ accounts, and only on 40.7% of his individual customers’ accounts, the SEC says. And he paid his wife $662,000 in salary over four years, though Victoria Investors’ only employees were Dawson and a part-time employee. The complaint does not state whether his wife was that part-time employee.
The SEC demands disgorgement, interest and penalties.