The Securities and Exchange Commission announced fines and sanctions against a Santa Barbara, Calif.-based hedge fund advisory firm on Tuesday, alleging the firm improperly used fund assets to pay undisclosed operating expenses.

Alpha Titans LLC, its principal Timothy McCormack, and general counsel Kelly D. Kaeser allegedly used the assets of two affiliated private funds to pay more than $450,000 in office rent, employee salaries and benefits, and other expenses without authorization from fund clients and without disclosing that fund assets were being used for these purposes.

The fund closed at year-end 2014 because of dwindling assets, said an Alpha Titans spokesperson. The SEC said in its order that the fund needed to hire an independent auditor to wind down any remaining fund operations.

The SEC also charged Simon Lesser, an outside auditor and partner at McGladrey LLC’s Chicago financials group, for producing misleading financial statements that the firm sent to investors. In a statement, the SEC alleges that Lesser was aware of how Alpha Titans used the fund assets but approved audit reports containing unqualified opinions that the funds’ financial statements were presented fairly.

Alpha Titans, McCormack and Kaeser allegedly sent investors audited financial statements that failed to disclose almost $3 million in expenses tied to transactions involving other entities controlled by McCormack. Lesser allegedly engaged in improper professional conduct while auditing the funds’ financial statements by not considering the adequacy of the related party disclosures in the funds’ financial statements, and thus failed to comply with the SEC’s generally accepted accounting principles.

Alpha Titans, McCormack, Kaeser and Lesser agreed to settle the SEC’s charges without admitting or denying the charges. The firm and McCormack agreed to pay a penalty of $200,000, a disgorgement of $469,522 and prejudgment interest of $28,928. McCormack and Kaeser agreed to be barred from the securities industry for one year, and Kaeser agreed to a one-year suspension from practicing on behalf of any client regulated by the SEC. Alpha Titans will no longer solicit new investments and is forbidden from accepting new clients as it winds down operations.

Lesser agreed to pay a $75,000 penalty and was suspended from practicing as an accountant for any SEC-regulated entity for at least three years.