Florida Securities Litigation and FINRA Arbitration Attorney, Russell L. Forkey, Esq.
The Respondent submitted an Offer of Settlement (the “Offer”) which the Commission accepted. Solely for the purpose of the administrative proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings in the order, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are admitted, Respondent consented to the entry of this Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934, Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940 (“Order”).
On the basis of this Order and Respondent’s Offer, the Commission found that:
1. This matter concerned fraudulent conduct by Roman Lyniuk, the founder and manager of Atlantis Capital Management, L.P. (the “Fund”), a small hedge fund located in New York and New Jersey. Respondent created the Fund in late 1996 and managed it through its investment adviser, Atlantis Capital Markets, LLC. From approximately late 1996 through the middle of 2004, the Fund consisted solely of capital provided by Respondent and his friends and family members. By 2004, all or most of that capital had been withdrawn and/or lost through trading. In 2004, Respondent began successfully marketing the Fund to potential outside investors, in part by providing misleading historical trading results to third-party hedge fund information providers.
2. After attracting outside capital, Respondent engaged in egregious self-dealing by obtaining undisclosed compensation of at least $400,000, including rebates on brokerage commissions that were generated through the Fund’s trading, and a referral fee of $40,000 in connection with his investment of $500,000 of the Fund’s assets in a start-up venture that offered limited liquidity.
3. In August and September 2006, the Fund lost approximately 29% and 57% of its net asset value, respectively. The August losses were trading losses. The September losses resulted from a combination of factors, including a) a write-down of the Fund’s investment in the start-up venture, which previously had been carried at face value; b) the transfer of Fund assets to cover losses in Respondent’s personal trading accounts; and c) additional trading losses.
4. Most of the Fund’s investors sought redemption of their interests shortly after they learned of the disastrous August 2006 losses. Instead of promptly calculating the investors’ net asset values and redeeming them, however, Respondent misappropriated most of the remaining funds by transferring money into a new fund and by making unauthorized payments to himself and his friends. Investors eventually received only about 10% of the amount in their capital accounts as of July 31, 2006.
5. Since approximately mid-2006 and as recently as December 2010, Respondent has been attempting to obtain investors for a new fund, Pacific Capital Markets Cayman LDC (“Pacific”). From mid-2007 through December 2010, Respondent had been promoting Pacific through a third-party hedge fund information provider, based on false and misleading information concerning the history, assets under management, and performance of the fund.
To review a more complete summary of wrongful conduct of Lyniuk and the sanctions imposed upon him, please follow the highlighted link.