West Palm Beach (HedgeCo.Net) – A group of California hedge funds is being investigated by the Securities and Exchange Commission after suspicions of illegal practices.

The “Premium Returns Funds,” which have been operating since May 2004, were supposedly using a covered call options trading strategy.  The hedge funds, which were run by investment manager Plus Money Inc., supposedly abandoned this strategy in late 2007, cleaned out the fund’s accounts, and dissipated the money through various transfers.

"Our complaint alleges that the defendants defrauded unsuspecting investors in a purported hedge fund," said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. "This action reaffirms the Commission’s commitment to taking emergency action when necessary to freeze ill-gotten gains for the protection of investors."

The hedge funds, run by Matthew La Madrid, raised $30 million from over 300 investors, but stopped paying the investors monthly returns beginning early this year.  

The SEC is seeking preliminary and permanent injunctions, return of ill-gotten gains with prejudgment interest, and penalties against the defendants. A preliminary hearing is set for May 14.    

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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