The SEC has charged a hedge fund adviser, its founder and a subadviser in a multi-year scheme to conceal more than $350 million in trading losses. The adviser purportedly allocated its funds’ assets among multiple, diverse subadvisers that were required to post “cash collateral” to cover trading losses. In practice, however, they concentrated their assets with one subadviser. At the heart of the scheme were multiple “round-trip” transactions with the subadviser and his affiliates designed to conceal losses and make it appear that he maintained the requisite collateral balances. Additionally, contrary to the adviser’s representations to investors, the subadviser was permitted to post non-cash collateral, much of which was worthless. This article discusses the related enforcement actions. See “SEC Charges Georgia Hedge Fund Adviser With Defrauding Investors” (Aug. 29, 2024).