The Securities and Exchange Commission has charged a New York City-based investment advisor and affiliated firms with malfeasance and ill-gotten gains involving collateralized debt obligations (CDOs) that caused investors millions in losses.
The SEC alleges that Thomas Priore and his firm, ICP Asset Management LLC, engaged in fraudulent misrepresentation involving four multi-million CDOs that caused investors to lose tens of millions of dollars. In the process, Priore and his affiliated firms improperly garnered tens of millions of dollars in advisory fees and undisclosed profits from clients and investors.
According to a complaint filed in the U.S. District Court for the Southern District of New York, ICP in 2006 became manager of the Triaxx CDOs that were invested mainly in mortgage-backed securities. The SEC alleges that Priore and ICP directed the CDOs to make numerous prohibited investments without obtaining the proper approvals, and subsequently misrepresented those investments to the CDO's trustees and to investors.
In addition, the SEC alleges that Priore and ICP made more than $1 billion in trades for the CDO at prices that often were significantly more than market value, which enabled ICP to collect millions of dollars in advisory fees from the CDOs.
Furthermore, the SEC charges Priore and ICP with making undisclosed cash transfers from a hedge fund they managed that enabled a ICP client to meet the margin calls of one of its creditors. Priore than misrepresented the transfers to the hedge fund investors.
Also named in the complaint is ICP's affiliated broker-dealer, ICP Securities LLC, and its parent company, Institutional Credit Partners LLC.
The SEC is seeking permanent injunctions barring future violations of federal securities laws, the return of ill-gotten gains with pre-judgement interest, and fines.