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Blotter July 2010

Royally Fraudulent

The Securities and Exchange Commission charged a New York-based money manager and his firm with fraud for touting investments he claimed were tied to the Chimay royal family of Belgium, and with stealing millions of dollars to pay his divorce lawyers and the mortgage on his multi-million dollar Hamptons house.

The SEC obtained an emergency court order to freeze the assets of Guy Albert de Chimay and his firm Chimay Capital Management, charging that Chimay solicited investments in a vehicle known as the “Bridge Loan Facility” (BLF). Chimay allegedly told investors he would pool their funds with millions of dollars of Chimay royal family fortune to make safe and profitable short-term loans to companies. Instead, the SEC complaint states, Chimay stole the money and falsified bank statements to hide the fraud.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Chimay claimed to be related to the current head of the Chimay royal family, the Prince de Chimay. According to the complaint, investors were told Chimay Capital had a long and profitable history as the U.S. investment arm for the Chimay royal family and the investment opportunity was available to a chosen few, who would receive guaranteed fixed annual returns of 12 percent regardless of the actual performance of the loans.

Churning CDOs

The SEC charged a New York-based investment adviser and three of his affiliated firms with fraudulently managing investment products tied to the mortgage markets as they came under pressure in 2007.

The SEC alleges that, at the direction of its owner and president Thomas Priore, ICP Asset Management defrauded investors in four multi-billion-dollar collateralized debt obligations (CDOs) by engaging in fraudulent practices and misrepresentations that caused the CDOs to lose tens of millions of dollars. Priore and his companies also improperly obtained tens of millions of dollars in advisory fees and undisclosed profits at the expense of ICP clients and investors, the SEC complaint says. ICP's affiliated broker-dealer ICP Securities LLC and its parent company Institutional Credit Partners LLC also are charged in the SEC's complaint.

According to the SEC's complaint, filed in the U.S. District Court for the Southern District of New York, ICP started serving as the collateral manager for Triaxx CDOs , which invested primarily in mortgage-backed securities, in 2006. The SEC alleges that ICP and Priore directed more than a billion dollars of trades for the Triaxx CDOs at what they knew were inflated prices.

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