$102 Million Offshore Fund Scam Gets Assets Frozen by SEC

The Securities and Exchange Commission has filed an emergency action charging an offshore fund and two individuals with engaging in a fraudulent scheme, and obtained an asset freeze to safeguard remaining investor funds at risk of immediate dissipation.

The complaint alleges that Ofer Abarbanel and Victor Chilelli have engaged in a scheme to defraud investors in an offshore mutual fund they controlled since 2018.

The Income Collecting 1-3 Months T-Bills Mutual Fund was supposed to invest primarily in U.S. Treasury securities and also enter into certain types of reverse repurchase agreements with U.S. Treasury securities serving as collateral.

The fund, however, invested only minimally in U.S. Treasuries and did not enter into any reverse repurchase agreements along the lines described in offering documents, the SEC alleged.

Instead, the fund routed nearly all investor funds to shell companies under the defendants’ control as part of uncollateralized sham lending arrangements with the fund.

When investors sought to redeem $106 million in investments last month, the defendants refused and instead took steps to transfer funds to an account from which no redemptions could be drawn, the complaint states.

Carolyn M. Welshhans, Associate Director in the SEC’s Division of Enforcement, said: “As this emergency action shows, the SEC will move quickly to protect investor funds from potential dissipation and misappropriation. We can detect misconduct and enforce the securities laws even where, as we allege happened here, fraudsters transfer and divert funds to shell companies.”

The SEC charged Abarbanel, Chilelli, and the fund with violating the antifraud provisions of the federal securities laws. The complaint also names as relief defendants six companies that either acted as purported counterparties with the fund or received fund assets.