An Indian-American executive at an investment advisory firm in New York has been charged with fraud by the US regulator for distributing falsified performance results and siphoning investor proceeds for his luxury car payments.
The Securities and Exchange Commission alleged that Aphelion Fund Management’s chief investment officer Vineet Kalucha fraudulently altered an outside audit firm’s report reviewing the performance of an investment account he managed.
SEC has also announced an asset freeze against the firm and charged Aphelion’s chief financial officer George Palathinkal for his complicity in the alleged fraud.
Palathinkal allegedly learned about Kalucha’s falsifications, which essentially changed an investment loss into a major investment gain in the account, it said.
Nevertheless, the falsified report showing the phony gain instead of the actual loss was distributed to prospective investors.
Investors were also separately provided false information about Aphelion’s assets under management and Kalucha’s litigation history.
Kalucha, who is also majority owner and managing partner of the firm, also is charged with siphoning investor proceeds for his luxury car payments and settlements of legal actions against him personally that are unrelated to Aphelion.
“We allege that on multiple occasions, Aphelion, Kalucha, and Palathinkal intentionally overstated the success of their investment strategy,” said Robert J. Burson, associate director of the SEC’s Chicago Regional Office.
“Kalucha also has been using investor money as his own, and emergency action was necessary to protect the interests of investors.”
A hearing on the SEC’s motion for a preliminary injunction has been scheduled for May 15.
The SEC’s complaint filed in US District Court for the Southern District of New York, alleges Kalucha and Palathinkal told investors at various times during 2013 that Aphielion had $15 million or more in assets under management.
The firm actually never had more than $5 million in assets under management at any point during that year.
SEC alleges Aphelion, Kalucha, and Palathinkal raised $1.5 million in investments for Aphelion from 2013 to March 2014 by representing to investors that the funds would be used for Aphelion’s operating expenses.
Kalucha actually used more than 40 percent of the funds raised in 2013 for his personal benefit, including down payment of a luxury BMW sedan, and payment for tax and accounting services for his personal finances. Palathinkal approved all of Kalucha’s withdrawals.