Hedge-fund manager Grant “Gad” Grieve and two New York investment advisory firms he controlled were sued by U.S. regulators

Hedge-fund manager Grant “Gad” Grieve and two New York investment advisory firms he controlled were sued by U.S. regulators over claims he listed a fictitious auditor while fabricating financial statements. Grieve, who managed Finvest Asset Management LLC and Finvest Fund Management LLC, created two “sham” firms that purportedly vouched for accounting and profits, the Securities and Exchange Commission said today in a complaint at federal court in Manhattan. He raised more than $11 million from U.S. clients since 2004, and began soliciting Europeans last year with “newly fabricated, fraudulent documents,” the SEC said. “He represented to potential investors that he had 54 consecutive months of positive returns, which we found to be highly suspicious” and determined to be false, Scott Friestad, an SEC attorney overseeing its lawsuit, said in an interview. Money managers who report consistent profits amid rising and falling markets are under scrutiny by investors and regulators after Bernard Madoff’s alleged $50 billion fraud. Since Madoff’s arrest Dec. 11, the SEC has announced unrelated lawsuits against at least six people for allegedly inflating profits or siphoning off client money. Grieve, 47, doesn’t yet have an attorney in the lawsuit, according to the SEC. There was no immediate response to e-mails sent to him and his firm, or to a phone number listed for him and Finvest Asset Management. Grieve is a citizen of South Africa and has lived in the U.S. and Israel, according to the SEC. He began managing an investment portfolio for a family office in the mid-1990s. In 2001, he founded Finvest Asset Management, which operates the Primer Fund. Six years later, he started a second investment vehicle, Yankee Fund, through Finvest Fund Management. He gave investors a bogus audit report printed on letterhead for an accounting firm called Kass Roland in Jersey City, New Jersey, according to the SEC. Phone numbers for the firm and its Internet domain name were listed to accounts in his name. No such company has registered with the state or with the Public Company Accounting Oversight Board, the U.S. watchdog for auditors of publicly traded companies, the SEC said. Grieve reportedly disputed an Aug. 8 article in the hedge- fund publication FINalternatives that said Finvest Asset Management may be “going under.” The firm had been unable to reconcile payments to investors in its managed accounts, and employees were working from home or looking for jobs, the article said, citing unidentified people.
“I have absolutely no idea from where this originates,” the publication quoted Grieve as saying at the time, noting the firm had recently suffered a power failure that had sent workers home early. “Clearly and categorically I must state that these suggestions are malicious and untrue.” In press releases since then, Grieve said he had left U.S. markets to expand his business in Europe with Finvest offices in cities including Zurich and London, the SEC wrote in its complaint. He said he secured a $300 million “mandate” from a wealthy European investor and was “allocated” about $2.5 billion for private equity investment from the office of an unidentified European family, the regulator said. Last month, he showed a U.S. brokerage statement for the Primer Fund to an institutional investor in Europe, according to the SEC. While the statement listed $118 million in a U.S. trading account for the fund on Dec. 31, the account actually had a negative balance of $65, the agency said.