A South Carolina investment fund manager pleaded guilty yesterday to defrauding clients out of millions of dollars through hedge funds he created, according to the U.S. Attorney for the District of New Jersey.
In addition to the criminal charges, George Heckler of Charleston, S.C., was charged with fraud in a civil complaint by the Securities and Exchange Commission for his mismanagement of the funds, which raised a total of $90 million between 2009 and 2019, the SEC announced yesterday. Approximately $32 million of the money was used to pay early investors. Heckler also used $1 million for himself, both entities said.
While perpetrating the fraud, Heckler controlled multiple investment funds, including Conestoga Partner Holdings, Cassatt Short Term Trading Fund and CV Special Opportunity Fund. While raising money, he consistently told investors their funds were protected and were making money, which was not true, authorities said. In fact, much of the money was never invested, but was used to pay earlier investors, Acting U.S. Attorney Rachael A. Honig said in a statement.
In one case, Heckler solicited $9.1 million from an investor and, instead of investing the money, used $4.6 million of the money to repay existing investors and the remainder to satisfy other debts he had, Honig said. Over the course of the scheme, 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 said.
Although Heckler was reporting gains to investors, in reality, the hedge funds, Cassatt and CV Special, suffered significant losses as a result of poor investments by Heckler, the SEC complaint said.
Sentencing on the criminal charges is set for July.
“Clients should be able to trust their investment adviser will invest their assets as promised and tell them the truth about their investments' performance," Scott A. Thompson, acting co-regional director of the SEC's Philadelphia Regional Office, said in a statement. "We allege that Mr. Heckler violated this trust, breached his duties to his clients and lied to cover up his investment losses, and investors lost millions of dollars."