(CN) - A Georgia federal judge granted an emergency court order late Thursday to freeze the assets of an investment adviser firm and its owner after the Securities and Exchange Commission filed charges alleging they diverted millions in investor money.
The SEC claims in the complaint filed on Thursday that the Delaware-based SJK Investment Management and its CEO Stanley Kowalewski defrauded investors in two hedge funds.
The funds raised more than $65 million in the last year and a half, but Kowalewski put $16.5 million of investors' money in a separate fund that he treated like a bank account.
Investigators say Kowalewski continued to live rent-free in a vacation home that he sold to the fund for nearly $5 million, which is a million more than he originally paid for it.
U.S. District Judge Timothy Batten Sr. granted the SEC's request for an emergency asset freeze, temporary restraining order and other remedies against Kowalewski and his firm.
The SEC also claims Kowalewski used the fund to pay himself about $1 million for personal and business expenses, pay the firm an "unfounded $4 million 'administration' fee" that Kowalewski then took as a "salary draw."
Investors received fraudulent account statements "showing substantial, positive, but illusory, investment returns," according to the complaint.
The SEC seeks permanent injunctions, penalties, disgorgement of ill-gotten gains and a ruling to bar Kowalewski from the financial industry. It is represented by house attorney Paul Kim.
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