SEC Charges Hedge Fund Adviser and Top Executives With Fraud

The Securities and Exchange Commission today charged SBB Research Group, LLC, a Chicago-area hedge fund adviser and its two top executives with a multi-year fraud that inflated fund values. According to the SEC's complaint, SBB Chief Executive Officer Samuel Barnett founded the firm in 2010 while still in college, raised millions from friends and family members, and invested almost exclusively in structured notes. The complaint alleges that as SBB sought outside investors, Barnett and Chief Operating Officer and Chief Compliance Officer Matthew Aven promised prospective investors that they would use "fair value" when recording investments. Instead, they used their own valuation model to artificially inflate the value of the structured notes. As a result, SBB misstated the funds' historical performance and overcharged investors approximately $1.4 million in fees.