Mad Men jail

Investment Advisor Gets More Than Five Years in Prison for Securities Fraud

George Heckler is also facing litigation from the SEC in connection with an alleged scheme that lasted a decade and defrauded investors of millions.

A South Carolina investment advisor who was charged by the Securities and Exchange Commission with perpetuating a decade-long fraud against investors was sentenced to more than five years in prison last week after previously pleading guilty to securities fraud in federal court. 

George Heckler faced criminal charges in New Jersey related to the same conduct detailed in the SEC’s complaint filed earlier this year. According to the commission’s complaint, Heckler had formed a private hedge fund in 1998 to manage money for friends and family, with Heckler acting as advisor, and by 2008 the fund totaled more than $34 million in investors’ capital. 

But in 2009, the fund suffered huge losses, with additional losses likely. Heckler didn’t tell investors about the fund’s problems, but instead formed Cassatt Short Term Trading Fund and CV Special Opportunity Fund, two separate hedge funds to conceal those losses so that investors in the failing fund would not seek to reclaim their money. Starting in 2011 until 2019, Heckler raised at least $90 million from investors ostensibly for those two funds.

Heckler told investors that their funds were being used in short-term equity trading that would result in returns on investments. But more than one-third of the money raised was never invested, and was instead used to repay existing investors and for Heckler’s debts, according to the SEC. In September 2014, one unnamed investor invested about $9.1 million into the Cassatt fund.

“Heckler did not disclose to Investor A that, at the time of this investment, Cassatt no longer had any open brokerage accounts or other direct trading capabilities,” the complaint read. “Instead of devoting Investor A’s investment to securities trading, Heckler used $4.6 million of Investor A’s money to repay existing CV Special investors and the remainder to satisfy other obligations he owed unrelated to Cassatt.”

In another instance, another unnamed investor who also worked as an investment advisor and hedge fund manager decided to create a new hedge fund that would invest its capital through a separate fund Heckler controlled. By July 2016, that investor had put about $10.1 million into Heckler’s fund, but those investments were never used to trade in the strategy the advisors agreed on; instead, he used the funds to repay debts and make redemption payments to an institutional investor with funds in Heckler’s Cassatt fund. 

Throughout the fraud, Heckler concealed it by offering investors false account statements with made-up gains, according to the SEC.

In all, Heckler had taken about $1 million in fees and distributions for his own use, according to the Justice Department. In addition to the prison sentence of 63 months, Heckler was also sentenced to three years of supervised release and was ordered to forfeit $19.25 million. The SEC’s complaint against Heckler is ongoing.

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