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SEC, New York Charge Hedge Fund Manager With Fraud

On Feb. 13, New York officials arrested and charged Moazzam Ifzal Malik, also known as Mark Malik, with 28 felony counts arising from his operation of what federal and state officials allege is a fraudulent hedge fund. Malik is the CEO and fund manager of Wolf Hedge Investment Management, an entity the authorities claim was merely a facade used to divert client funds for Malik’s personal use. In conjunction with his arrest, the U.S. Securities and Exchange Commission asked a federal judge in Manhattan to issue a restraining order and asset freeze against Malik and Wolf Hedge.

SEC v. Malik

According to court papers filed by the SEC, Malik has run his so-called hedge fund under a number of different names since 2011. The SEC said Malik defrauded at least 16 investors out of $840,000. The criminal charges Malik faces address five alleged victims who lost $250,000, according to New York Attorney General Eric T. Schneiderman.

The SEC said the 33-year-old Malik simply kept most of his clients’ money for himself. Despite telling customers his fund held millions in assets, the SEC said Wolf Hedge’s trading accounts, which were closed more than a year ago, only contained about $90,000. Malik reportedly ran a one-man operation, occasionally using “uncompensated individuals” to cold call potential clients.

Malik reportedly went to great lengths to make it look like he was running an actual hedge fund. This included misleading not just customers but financial media. The SEC said Malik was identified in a March 2011 Bloomberg News profile as a “rising fund manager.” He also allegedly obtained a high performance rating from a leading information service by using fabricated financial statements and auditor’s reports.

Unfortunately, when investors actually tried to reclaim their money, officials said Malik resorted to some downright scary tactics. In addition to simply ignoring redemption requests, the SEC said Malik, using a false identity, actually told one client he had died. Another client received an email the SEC described as threatening in that Malik described himself “as dangerous and threatening as a werewolf.”

The SEC noted it has been investigating Malik and Wolf Hedge for some time. When questioned by Commission staff, Malik invoked his Fifth Amendment right against self-incrimination. Of course, that is not evidence of any criminal act, and Malik is innocent until proven guilty in a court of law.

Know Who You Are Dealing With

Investors should always be wary of hedge fund managers promising fantastic returns on investments. And as the charges against Malik demonstrate, savvy investors should also learn about the backgrounds of the persons they trust with their money. Although Malik’s marketing materials claimed he had “over a decade of experience” running billion-dollar funds, New York prosecutors said, in reality, “Malik’s only financial experience was as a trainee at a New York City financial consulting firm [and] that Malik was only registered as a broker from 2007 to 2009.”

If convicted of all criminal charges, Malik faces upwards of 20 years in prison. That may prove to be small comfort to the investors he is accused of defrauding. If you have been the victim of a hedge fund scam and need advice on how to go about seeking restitution, contact Florida securities fraud attorney Gregory Tendrich, P.A., right away.

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