Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—S.D.N.Y.: Hedge fund solicitor robs 25 investors of $1.5M, (Dec 1, 2025)

By Jay Fishman, J.D.

Fraudster paid his personal expenses and made Ponzi-like payments with the raised $2.7 million.

The SEC filed a complaint against an individual defendant and his hedge fund and trading account in New York’s Southern District Court, for perpetrating a scheme against 25 investors that resulted in losses of more than $1.5 million. The Commission, alleging violations of Securities Act Section 17(a); Exchange Act Section 10(b)/Rule 10b-5; and Investment Advisers Act Sections 206(1), (2) and (4), requested permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest and a civil monetary penalty (SEC v. Lichtenstein, No. 7:25-cv-08742 (S.D.N.Y. Oct. 22, 2025)).

The two investments. Between July 2022 and August 2024, the individual defendant raised at least $2.7 million from over 25 investors, many of whom were his family members, friends and neighbors. He was an investment adviser to the hedge fund he solicited the investors to invest in. Specifically:

• Some investors invested in the hedge fund that used a day-trading strategy he claimed had profited him personally; and

• Other investors put money in the defendant’s trading account that used the same day-trading strategy as the hedge fund but promised a five-percent-per-month fixed interest payment from the account’s trading returns.

The scheme. The defendant, instead of investing all the investors’ money as promised, used the money to pay his personal expenses (e.g., credit card and mortgage payments, bars, restaurants, travel and cash withdrawals), along with using later investors’ money to make Ponzi-like payments to meet redemption requests and interest obligations owed to the earlier investors. The money he legitimately invested negatively performed overall but rather than tell investors the truth, he fabricated positive returns for them on online dashboards. The scheme collapsed in the summer of 2024 when he ran out of money.

Parallel action. The U.S. Attorney’s Office for the Southern District of New York filed criminal charges against the defendant in a parallel action.

The case is No. 7:25-cv-08742.

Attorneys: Peter Mancuso for the SEC.

LitigationEnforcement: AlternativeInvestmentFunds FraudManipulation HedgeFundsNews InvestmentAdvisers NewYorkNews