NY Court issues final judgment against Goldsky Asset Management

Another enforcement action taken by the United States Securities and Exchange Commission (SEC) has come to an end. On January 2, 2019, Judge Valerie E. Caproni of the New York Southern District Court signed final judgment against Australia-based investment adviser Goldsky Asset Management, LLC and its owner, Kenneth Grace.

The defendants have been charged by the SEC for making false and misleading statements about the business in filings with the Commission.

As per the orders, Goldsky Asset Management will pay a civil penalty in the amount of $50,000, whereas Kenneth Grace will pay a civil penalty in the amount of $25,000.

Let’s recall that, according to the SEC’s complaint, Goldsky’s Forms ADV filed with the Commission in 2016 and 2017, which Kenneth Grace signed, stated that its hedge fund, Goldsky Global Alpha Fund, LP, had an auditor, a prime broker and custodian, and an administrator. In addition, in its Forms ADV and Forms ADV Part 2A, Goldsky stated that it managed over $100 million in discretionary assets under management. Goldsky’s website also claimed that Goldsky Fund earned: 19.45% compounded annual returns since inception, 70.33% compounded monthly returns since inception, and 25.30% returns for the year ended September 30, 2017.

The SEC alleges that these statements were false and misleading because Goldsky, Grace and Goldsky Fund had no agreements with service providers, Goldsky and Grace did not manage $100 million of assets, and Goldsky Fund did not have any investment returns as it never had any assets.

The SEC’s complaint charged Goldsky and Grace with violating the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, Sections 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, or in the alternative, that Grace aided and abetted Goldsky’s violations.