(February 28, 2013) — A Connecticut-based hedge fund and advisory are at the center of the US Securities and Exchange Commission’s (SEC) latest case.
The complaint alleges that in 2008, David Bryson and Bart Gutekunst, co-owners of New Stream Capital, secretly altered the fund’s capital structure at the behest of its largest investor, Gottex Fund Management. The new structure gave Gottex and certain other offshore investors priority access to fund assets in the event of liquidation, according to the SEC’s documents.
Furthermore, the regulator claims that Bryson and Gutekunst fraudulently raised additional capital after this restructuring by not disclosing the changes to potential investors.
“Hedge fund managers who put greed ahead of full disclosure to investors violate a fundamental trust,” said George Canellos, acting director of the SEC’s Division of Enforcement, in a statement. “Bryson and Gutekunst told investors they were all investing on equal terms when in fact some were investing in a fund that had been secretly restructured to their detriment.”
New Stream, which filed for bankruptcy in 2011, reportedly managed a $750 million fund focused on illiquid investments in asset-based lending. The complaint indicates that institutions contributed the majority of New Stream’s capital. The claims on New Stream’s assets total approximately $182 million, according to court documents, while only $9.7 million is expected to be recovered—about five cents on the dollar for investors.
An attorney for Bryson did not immediately return a request for comment.