According to the U.S. Securities and Exchange Commission (SEC), defunct Florida hedge fund, Everest Capital, and Marko Dimitrijevic, its sole managing member, will pay more than $3.2 million to settle accusations that the firm issued misleading documents about the risk and geographic concentration of the firm's investments.
The firm was accused of failing to apply promised risk-management systems to currency positions in its Global Fund, which at its peak had roughly $830 million in assets under management. Additionally, according to the authorities, statements regarding the fund's exposure to certain currencies were misleading.
The SEC also added that given that the company failed to accurately disclose the fund's exposure in marketing materials, investors were not aware of the extent of the fund's highly concentrated currency position.
Hedge Fund Concentrates Investments, Increasing Exposure to Risk
While the hedge fund's documents stated that Everest had a "disciplined" risk-based investment management style, the Global Fund's offering statements supposedly were deceiving in saying that its risk-management team could reduce risk independent of the investment team.
According to the SEC, Dimitrijevic said that he had learned valuable lessons in 1998, when he was involved in high concentrations of Russian investments. He claimed he would never again make concentrated investments in any single geographic region.
But the SEC said that between September 2014 and January 2015, Dimitrijevic did exactly that. Throughout almost a year, Mr. Dimitrijevic made investments that drastically elevated the fund's exposure to euro-to-Swiss franc exchange positions.
The SEC also explained that in September 2014, Dimitrijevic invested heavily in the EUR/CHF position and that when the Swiss franc rose more than 30% in comparison to the Euro, the fund suffered losses exceeding its assets.
As a result, Everest closed its Global Fund, and investors lost almost all their investment.
Firm Agreed to Pay $2 Million Fine and Additional Penalty
Mr. Dimitrijevic and the firm consented to cease-and-desist from further violations without admitting or denying the findings. And will pay a $2 million fine, interest of $458,226, and an additional $750,000 penalty.
Dimitrijevic is currently listed as founder and chairman of Volta Global, which, according to its website, is a private investment group specializing in venture capital, private equity, real estate, and public markets.
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