SEC secures asset freeze order against Kinetic Investment Group

Maria Nikolova

The order is issued in connection with an alleged fraudulent, unregistered securities offering that raised approximately $39 million.

The United States Securities and Exchange Commission (SEC) today announces that it has secured an asset freeze and other emergency relief against Florida-based investment adviser Kinetic Investment Group LLC and its managing member, Michael Scott Williams.

On March 6, 2020, U.S. District Court Judge William F. Jung granted the SEC’s request for emergency relief, including an asset freeze and an order for records preservation, against Kinetic Group, Williams, and a number of entities enlisted as relief defendants. The court also granted the SEC’s request to appoint Mark Kornfeld as receiver over Kinetic Group and the relief defendants.

The order is issued in connection with an alleged fraudulent, unregistered securities offering that raised approximately $39 million from at least 30 investors located mostly in Florida and Puerto Rico.

According to the SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, Kinetic Group and Williams fraudulently raised millions of dollars by making material misrepresentations to investors who they solicited to invest in Kinetic Funds I LLC, a purported hedge fund that they managed. The complaint alleges that the defendants represented, among other things, that Kinetic Funds’ largest sub-fund invested solely in U.S.-listed financial products and that at least 90% of its portfolio was hedged using listed options. In reality, Williams invested a significant part of the sub-fund’s assets in a private start-up company owned by Williams.

The complaint further says that Williams misappropriated at least $6.3 million through undisclosed loans to himself and his entities.

The SEC’s complaint charges Kinetic Group and Williams with violating the antifraud provisions of the federal securities laws. Williams is also charged, in the alternative, with aiding and abetting Kinetic Group’s violations of the federal securities laws.

The regulator seeks injunctions, disgorgement of allegedly ill-gotten gains with pre-judgment interest, and financial penalties against the defendants.

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