The Securities and Exchange Commission has shut down two Beverly Hills hedge funds that allegedly used a web of lies to raise $38 million from 20 investors.

The funds lost millions of dollars over the years and had less than $650,000 in assets at the end of 2008, but the key figure in the scheme, Bradley L. Ruderman, doctored the funds' account statements, bragging of more than $800 million in assets and annual returns of between 15% and 60%, according to the SEC.

He convinced one prospect to invest in the funds by falsely claiming the funds' investors included Lowell Milken of the Milken Family Foundation and Larry Ellison, CEO of Oracle Corp., according to the SEC.

The lies also included claims that the funds held positions in companies such as Apple, Microsoft Corp. and Wal-Mart Stores, according to the SEC.

"Ruderman was willing to say or do anything to persuade investors to entrust their money to him, particularly when his scheme was unraveling," says Rosalind R. Tyson, director of the SEC's Los Angeles regional office.

The funds, Ruderman Capital Partners and Ruderman Capital Partners A, has been taking investors funds since at least 2002, according to SEC, with two investors putting $1 million into the funds as recently as January-money that was used by Ruderman to make a "Ponzi-like" payment to an investor who requested a $750,000 withdrawal.

The scheme collapsed in April when Ruderman's attorney sent a letter to investors stating that "there is currently very little value in the assets held by the [funds]," according to the SEC.

As of March 31, 2009, the funds had total remaining assets of about $387,000, according to the SEC complaint.

The SEC obtained an order today shutting down the funds from U.S. District Court, Central District of California.