The Securities and Exchange Commission today revoked the registration of a Seattle area-based registered investment adviser and barred its principal from the securities industry for stealing money from a private fund the adviser managed. The remaining assets will be liquidated and placed in a fund for distribution to harmed investors.
According to the SEC’s order, Dennis Gibb, the owner of Sweetwater Investments Inc., stole more than $3 million from Sweetwater Income Flood LP, a private fund Sweetwater managed, to pay for personal expenses, including his mortgage and car payments, and to keep Sweetwater’s business afloat. To hide his theft and convince investors to put even more money into the fund, he sent fraudulent account statements and tax documents to investors. The false documents showed, in the aggregate, that there was $7.8 million in the fund, when there was actually only about $1.8 million. Gibb also falsely reported in SEC filings that Income Flood had been audited, and that Sweetwater had over a billion dollars in assets under management, when it really had only $73 million. Gibb failed to hire an independent auditor or have a surprise verification of the fund’s assets conducted. Gibb’s fraud was discovered by the SEC’s San Francisco Office of Compliance Inspections and Examinations staff when they conducted an examination of Sweetwater.
“The diligence of the SEC’s regional examination staff was critical in uncovering Gibb’s fraud,” said Erin Schneider, Associate Director for the SEC’s San Francisco Regional Office. “As a result, the remaining funds will be preserved and returned to harmed investors.”
The settled order finds that Gibb and Sweetwater violated the anti-fraud and custody provisions of the federal securities laws and made false statements in SEC filings. The SEC’s order also finds that Gibb and Sweetwater are liable for disgorgement of money stolen, plus prejudgment interest.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington today announced that Gibb pleaded guilty to criminal charges.
The SEC’s investigation was conducted by Ruth Hawley and Ellen Chen and supervised by Jeremy Pendrey of the San Francisco Regional Office. The examination that led to the investigation was conducted by Bradley Cline, Samuel Kim, John Chee, and Kenneth Schneider. The SEC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Western District of Washington.