(HedgeCo.Net) The Securities and Exchange Commission has announced that it filed an emergency action and obtained a temporary restraining order and asset freeze against two Pennsylvania-based brothers and three entities they control to stop an offering fraud and the misappropriation of investor proceeds.

According to the SEC’s complaint, from at least July 2019 through May 2020, brothers Sean Hvizdzak and Shane Hvizdzak offered securities in a private fund that purported to invest in digital assets by misrepresenting fund performance, fabricating financial statements, and forging audit documents. For example, the complaint alleges that the Hvizdzaks misrepresented in marketing materials that the fund earned 100.77% and 92.90% on its investments during the third and fourth quarters of 2019, when in fact the fund actually lost money in those quarters. In addition, the SEC alleges that the brothers diverted tens of millions of dollars from the fund to personal accounts at banks and digital asset trading platforms, and then transferred the assets on multiple blockchains to themselves and others.

“As alleged in our complaint, the Hvizdzaks touted exceptional, but false, performance to potential investors when offering their fund,” said Adam S. Aderton, Co-Chief of the SEC’s Asset Management Unit. “Investors should be skeptical of claims that seem too good to be true.”

The SEC complaint, unsealed today in federal court in the U.S. District Court for the Western District of Pennsylvania, charges the Hvizdzaks, Hvizdzak Capital Management, LLC, High Street Capital, LLC, and High Street Capital Partners, LLC with violating the antifraud provisions of federal securities laws.

On June 16, 2020, in addition to granting a temporary restraining order and an asset freeze, the court ordered an accounting, expedited discovery, and an order prohibiting the destruction of documents. A hearing is scheduled for June 30, 2020, to consider continuing the asset freeze and the issuance of a preliminary injunction.