Joseph Krigsfeld

Date:

June 11, 2018

Type of alert:

SEC Cease-and-Desist  

On May 24, 2018, the Securities and Exchange Commission (SEC) released an Order Instituting Administrative and Cease-and-Desist Proceedings (Order) against Aberon Capital Management LLC and one of its managing members, Joseph Krigsfeld, for misrepresenting the performance and assets of a hedge fund to investors. Krigsfeld was previously a registered representative at Goldman, Sachs & Co. in New York, New York from October 2003 to February 2006, but has not been registered with a firm since.

In 2009, Aberon began operating a hedge fund called Aberon Capital Master Fund, LP (ACMF), a Cayman Island limited partnership with several feeder funds under it (collectively “Aberon Funds”). According to the Order, the Aberon Funds had two initial investors: an offshore entity beneficially owned by a relative of Krigsfeld and a friend of Krigsfeld. Between September 2009 and March 2012, Krigsfeld’s relative invested nearly $30 million in the Aberon Funds and Krigsfeld’s friend invested $200,000.

The SEC alleged that Aberon and Krigsfeld repeatedly misrepresented the value and performance of the Aberon Funds. Due to a poor trading strategy, the vast majority of the Aberon Funds’ assets were lost in unprofitable trading and margin calls. By October 2012, ACMF had lost over $29 million and its assets were less than $500,000. In April 2014, Krigsfeld invested $4.75 million of his own funds to recapitalize ACMF. However, its trading continued to be unprofitable. By April 2017, ACMF’s assets were valued at a mere $1,000.

Based on the foregoing, the SEC asserts that Aberon and Krigsfeld willfully violated Sections 206(1), 206(2), and 206(4) of the Advisers Act. The Cease-and-Desist Order prohibits Aberon and Krigsfeld from committing or causing any violation or future violations of the relevant provisions of the Advisers Act. The SEC also barred Krigsfeld from association with any broker, dealer, and investment adviser and prohibited him from serving or acting as an employee or other member for a registered investment company or affiliated person of an investment adviser, depositor, or principal underwriter. Krigsfeld must also pay a $160,000 civil money penalty. The SEC censured Aberon for the same violations.

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