Facts

In 1999, the defendant encouraged his neighbor, Kevin Bradford, to invest in the Viper Founders Fund and later agreed to manage the fund for Bradford. Bradford placed more money into the fund and received fraudulent confirmations regarding the security of his investments. In reality, no brokerage accounts were held in the Viper Founders Fund since Jan. 1, 2003. Betty Ferrero also invested in this fund.

In 2003, Ehee created Compass West Fund and raised about $4 million in investments. In 2006, when investors asked for audited financial statements, Ehee provided false statements stating that the Viper Fund and Compass West Fund contained millions in assets as well as returns.

PLAINTIFF'S CONTENTIONS:
The Securities and Exchange Commission claimed that from 2004 to 2006, Edward Ehee and his businesses, Compass Fund Management LLC and Viper Capital Management LLC, misappropriated millions from hedge-funds, for which they managed. Ehee utilized these funds to pay back debts to other investors and for personal as well as recreational services. The SEC further claimed that he lied on financial statements by claiming positive returns.

Plaintiff contended that defendants committed a variety of securities law violations. The plaintiffs alleged that the defendants misappropriated funds by using the money to make interest payments to another investor and pay bills. Plaintiff also claimed that defendant transferred money to his personal accounts, gave money to family members, paid for vacations, and made car and mortgage payments.

Lastly, the plaintiff claimed that defendant filed a Form ADV, which fraudulently stated that an annual audit would be performed.

DEFENDANT'S CONTENTIONS:
Ehee asserted his Fifth Amendment constitutional rights.

Result

Parties settled for $4,023,948, representing Ehee's disgorgement of profits, with interest totaling $511,819. Ehee also consented to the sale of his residence.

Other Information

FILING DATE: Nov. 8, 2008.