As the market and CDO continued to nosedive, Morales directed his employees to conduct a series of so-called cross trades between the firm’s hedge funds to further hide losses from investors, the SEC alleged. Worse, Morales reported the trades to clients using fraudulent prices he fabricated to hide CDO losses, the SEC said.
Morales also supposedly lied to the family about their exposure to the CDO and doubled their stated 10% equity exposure to the CDO to 20% using “deceptive” trades, the SEC alleged.