SEC Charges Minneapolis-Based Hedge Fund Manager Steven R. Markusen with Swindling Investors and Portfolio Pumping; Funds Used to Sport Lexus
The Securities and Exchange Commission reportedly charged Steven R. Markusen, a Minneapolis-based hedge fund manager, his investment advisory firm, Archer Advisors LLC, and an accomplice, Jay C. Cope, with bilking investors in two hedge funds out of more than $1 million under the auspices of research expenses and fees. In reality the duo were using the cash to pay for boarding school tuition, country clubs dues and to buy a shiny new Lexus, the SEC alleges.
Markusen and Cope Executed Fund Scheme
The SEC alleges that even as the Archer’s fund performance worsened, Markusen and Cope found a way to enrich themselves at the expense of their own fund investors. Markusen habitually caused the funds to reimburse Archer for fake research expenses, and he eventually routed much of that money to his personal checking account, the SEC reports. Markusen reportedly routinely paid Cope $10,000 a month for phony research reports, even twice-charging investors twice for said reports. Meanwhile, Cope did not conduct research, the SEC alleges, as his role at the firm was to execute trades, and solicit new clients. First, Markusen billed the funds directly by erroneously claiming that Archer had paid Cope to conduct “research” for the funds, then he and Cope would improperly divert “soft dollars” from the hedge funds to Cope for the same supposed “research”, claiming that Cope was an independent consultant, according to the SEC. Soft dollars were supposed to have been used to buy third-party investment research that benefited the funds.
Markusen Also Accused of Manipulating Stock Prices
Markusen and Cope also invested nearly 75% of Archer’s fund portfolio in the stock of CyberOptics Corp. (CYBE), thus becoming its majority shareholder, the SEC alleges. They then tried to pump up the stock price on the last day of trading each month’s trading by improperly putting buy orders on the stock seconds before the market’s close, the SEC reports. The closing prices were used to calculate the fund’s returns and management fees to inflate Archer’s report to investors, the SEC notes.
Investment Fraud Lawyers Investigating
The Peiffer Rosca securities attorneys often represent investors who lose money as a result of Ponzi schemes, investment fraud, or stockbroker misconduct. They are currently investigating the possibility of assisting victims with the recovery of their losses. They take most cases of this type on a contingency fee basis and advance the case costs, and only get paid for their fees and costs out of money they recover for their clients.
Investors who believe they lost money as a result of investment fraud or misconduct may contact the securities lawyers at Peiffer Rosca, Alan Rosca or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at 888-998-0520.