As Matt Levine says, “Everything is Securities Fraud“.
Michael G. Hull, Christopher J. Nohl, Greenpoint Asset Management II LLC, Chrysalis Financial LLC, Bluepoint Investment Counsel LLC, Greenpoint Tactical Income Fund LLC, and Greenpoint Rare Earth Trading Account LLC all got sued by the Securities and Exchange Commission for securities fraud back in 2020. The heart of the action was that they fraudulently inflated returns on investments in an illiquid portfolio of gems, minerals, and private equity.
Just owning previous gems is not going to get you subject to SEC jurisdiction. But selling interest in a fund that purports to own precious gems is going to get you subject to jurisdiction. If you are wildly overstating the value of those gems to raise money and charge management fees, you are committing securities fraud.
The SEC complaint puts the group’s own words against them by noting that the investment materials call it a securities offering.
“As of June 30, 2018, Greenpoint Tactical Income Fund reported assets with a cost basis of $40.1 million and a fair market value of $135.3 million. These purported remarkable returns were derived primarily from two sources. The Fund reported that as of June 30, 2018, its collection of gems and minerals was worth $68.3 million, composed of $21.9 million in original cost and $46.4 million in unrealized gains. The Fund also reported that its shares in Amiran were worth $46.2 million, similarly composed of $9 million in original cost and $37.2 million in unrealized gains.”
According to the SEC, the shares of Amarin were worthless because the company was defunct. They also claimed the value of the gems were wildly overstated.
A jury agreed and judge made a final judgment against them.
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