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SEC Charges Houston Hedge Fund Manager With Fraud

SECNew York (HedgeCo.Net) – The SEC has issued charges against a Houston-based hedge fund manager and his firm accused of defrauding investors in two hedge funds and steering bloated fees to a brokerage firm CEO who also is charged in the SEC’s case.

The SEC’s Enforcement Division alleges that George R. Jarkesy Jr., worked closely with Thomas Belesis to launch two hedge funds that raised $30 million from investors. Jarkesy and his firm John Thomas Capital Management (since renamed Patriot28 LLC) inflated valuations of the funds’ assets, causing the value of investors’ shares to be overstated and his management and incentive fees to be increased.

Jarkesy, a frequent media commentator and radio talk show host, also lied to investors about the identity of the funds’ auditor and prime broker, the SEC says.

Meanwhile, although they shared the same “John Thomas” brand name, Jarkesy’s firm and Belesis’ firm John Thomas Financial were portrayed as wholly independent. Jarkesy led investors to believe that as manager of the funds, he was solely responsible for all investment decisions. However, Belesis sometimes supplanted Jarkesy as the decision maker and directed some investments from the hedge funds into a company in which his firm was heavily invested.

The administration wants to determine what, if any, remedial action is appropriate in the public interest against Jarkesy, John Thomas Capital Management, Belesis, and John Thomas Financial including disgorgement and financial penalties.

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