The Securities and Exchange Commission today announced fraud charges against Detroit-based EIA All Weather Alpha Fund Partners I LLC (EIA) and its sole owner, RIA Andrew M. Middlebrooks, for an alleged multiyear Ponzi scheme that the agency said included the misappropriation and loss of nearly $39 million in investor funds.

On May 19, the SEC obtained emergency relief from the U.S. District Court in the Eastern District of Michigan, which approved a temporary restraining order against EIA and Middlebrooks and an asset freeze against both defendants.

The commission said in its complaint that from at least mid-2017 to April 2022, EIA and Middlebrooks deceived investors in their hedge fund, the EIA All Weather Alpha Fund I LP, by making false and misleading statements that “wildly” misstated the fund’s performance and total assets. The SEC also said in the complaint that the fund and Middlebrooks provided falsified investor account statements, misrepresented that the fund had an auditor and created and disseminated a fake audit opinion to investors.

From at least mid-2017 through the present, Middlebrooks used EIA to solicit and raise approximately $39 million from over 100 investors for what he claimed to be a long/short equity hedge fund, the SEC said.

Middlebrooks and the fund represented to investors and prospects that the fund “had extremely successful trading performance, with cumulative returns upwards of 2,500% from the fund’s inception.” In reality, the fund suffered “catastrophic trading losses” of approximately $27 million, the SEC said.

"As we allege in the complaint, Middlebrooks lured investors by touting extraordinary performance returns and then concealed the truth of his fraud, including by fabricating documents provided to investors," said C. Dabney O’Riordan, co-chief of the SEC Division of Enforcement’s Asset Management Unit, in a statement. "Our swift action is intended to protect investors from future harm."  

The SEC’s complaint also claims that EIA and Middlebrooks misused new investor money to make $9 million in Ponzi-like payments to other investors in the fund in order to continue to deceive investors into believing that the fund was profitable.

Middlebrooks also misappropriated investor funds for personal use, allegedly transferring at least $470,000 to his wife’s business, making more than $750,000 in transfers to his personal bank account and using $64,000 in investor money to pay for jewelry, the agency said.

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