The SEC has barred a New Jersey-based hedge fund manager from the securities industry after he allegedly misappropriated hundreds of thousands of dollars of his investors' funds since 1996.
Roman Lyniuk, 54, of Rumson, N.J., accepted the ban, as well as an obligation to pay disgorgement of $4,072,500 and prejudgment interest of $1,181,606, under a consent agreement with the SEC, under which he neither admitted to or denied the allegations.
The SEC alleges that since 1996, Lyniuk has created funds and, through personal withdrawals and bad trades, has lost millions of his clients' investments, while enriching himself through high salaries and commissions.
Lyniuk created his first fund, Atlantis Capital Management LP, in 1996, through capital supplied by friends and family members. By 2004, most of the capital had been lost through withdrawals or bad trades, but he began successfully marketing the fund to outside investors that same year-with the help of misleading historical trading results that inflated the size of the funds, according to the SEC.
After attracting outside capital, the SEC alleges, he engaged in "egregious self-dealing" be securing compensation of at least $400,000 through fees and commissions.
In September 2006, after losing the majority of the fund's assets-partly due to Lyniuk using funds to cover losses in his personal trading accounts-investors sought redemptions. Lyniuk, however, proceeded to misappropriate the remaining funds, partly by making unauthorized payments to himself and his friends, according to the SEC. The SEC noted one $970,000 transfer that was used to offset a negative balance in one of his private accounts. Investors ended getting only about 10% of their investments back.
Since 2006, and as recently as December 2010, he had been attempting to obtain investors for a new fund, Pacific Capital Markets Cayman LDC ("Pacific"), according to the SEC.