SOUTH CAROLINA INVESTMENT FUND MANAGER CONFESSED TO $20 MILLION RIP-OFF SCHEME

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Source: MEGA

Mar. 14 2021, Updated 1:57 p.m. ET

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A South Carolina investment fund manager admitted his role in scheming and swindling more than $20 million from investors through misrepresentations about trading strategy and fund performance in New Jersey.

George Heckler, 64, of Charleston, South Carolina, pleaded guilty before U.S. District Judge Madeline Cox Arleo to one count of securities fraud on March 9.  

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Prosecutors say Heckler managed, controlled or was involved with multiple investment funds, including Conestoga Partner Holdings (Conestoga), Cassatt Short Term Trading Fund LP (Cassatt), CV Special Opportunity Fund LP (CVSO), and TA1 LLC (TA1), and misled investors by claiming would invest their funds in particular trading strategies. 

Instead, he diverted their funds out of Cassatt and TA1 for “purposes inconsistent with the trading strategies,” including paying out millions of dollars to other investors and using funds to cover losses suffered by other funds under his management control between 2014 to 2018.

During this four-year run, Heckler reportedly heckled investments from a victim, claiming the money would be invested in Cassatt, which employed a “first loss” trading strategy to protect investors from losses.

Cassatt did not have a brokerage account, but Heckler told the victim the firm was still involved in the strategy. 

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In September 2014, the victim invested approximately $9.1 million in Cassatt, relying on Heckler’s representation. Authorities said Heckler used $4.6 million of the victim’s investment to repay existing investors and the remainder to satisfy other personal debts.

Heckler reportedly approached another victim about the possibility of creating a hedge fund that would deploy capital to first-loss traders, who would serve as the “first loss” protection for investors’ capital in 2015.

That victim reportedly formed a hedge fund, and  invested $10.1 million in a bogus agreement that the investment would be used for an “options arbitrage dividend recapture trade,” otherwise known as the “skate trade.” It turned out, none of this investment was used for the “skate trade,” and authorities determined that the investment was used for other purposes, including repaying others who had previously invested with Heckler.

Officials said Heckler sent out statements to investors that misled them into believing the value of their investments was increasing, when, in fact, the value was declining.

Authorities determined that  Heckler took approximately $1 million in fees and distributions from the fraudulently obtained investments for his personal use. 

Heckler faces a maximum penalty of 20 years in prison and a $5 million fine. Sentencing is scheduled for July.

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