ATLANTA (CN) – The SEC says two hedge fund managers from Georgia and their businesses “stole” more than $1.6 million in money intended for the Palisades Master Fund. The SEC sued Paul T. Mannion Jr., of Norcross, and Andrews S. Reckles, of Milton, and their businesses, PEF Advisors Ltd. and PEF Advisors LLC. Palisades Master Fund is a relief defendant.
The SEC accuses the men of overvaluing illiquid fund assets they placed in a “side pocket,” and says they “stole investor money to pay for their own personal investments and made material misrepresentations in connection with a private securities transaction.”
“A side pocket is a type of account that hedge funds use to separate particular investments that are typically illiquid from the remainder of the investments in the fund,” the SEC said in a statement announcing the federal complaint. It added: “The SEC’s Asset Management Unit has been probing whether funds have overvalued assets in side pockets while charging investors higher fees based on those inflated values.”
The SEC seeks disgorgement, penalties and injunctions.