The SEC recently commenced an enforcement action against a hedge fund manager, along with its founder and CEO, for misleading investors about the nature and value of the assets held by its funds. The respondents had promised investors that the funds they managed would purchase legal fee receivables from law firms in settled cases. However, the cease-and-desist order instituted by the SEC alleges that a substantial portion of investor money was actually used to purchase receivables from cases that were unsettled or where collection was subject to ongoing litigation risk. The respondents also allegedly manipulated the value of the receivables they purchased. This case highlights the need for hedge fund managers to ensure the investments held in their portfolios, as well as the valuation of those investments, are in line with disclosures made to investors. This article outlines the SEC’s allegations and the relief requested. For more on litigation funding, see “How Can Hedge Funds Mitigate the Risks of Investments in Litigation? An Interview with Kenneth A. Linzer” (Jun. 21, 2012); and “In Turbulent Markets, Hedge Fund Managers Turn to Litigation Funding for Absolute, Uncorrelated Returns” (Jun. 24, 2009).