(Reuters) - A California fund manager was charged with fraud by the Securities and Exchange Commission, which said he raised more than $60 million for a fund by falsely touting steady returns from conservative investments he did not make.
The SEC said John Geringer used false and misleading marketing materials to convince investors his GLR Growth Fund returned 17 percent to 25 percent a year from 2001 — two years before the fund was created — until 2011, largely from investments tied to major stock market indexes.
It said this included 2008, when the fund’s supposed nearly 24 percent gain contrasted with the Standard & Poor 500’s loss of 38.5 percent.
Rather, the SEC said Geringer produced “consistently negative” returns, and since the middle of 2009 invested in no publicly-traded securities but plowed at least $29 million into two private technology startups.
The regulator also said Geringer diverted several million dollars to his firm GLR Capital Management LLC, masked the fraud in a Ponzi-like fashion by paying millions in “returns” to older investors with money from newer investors, and created false account statements showing growth in customer balances.
“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” Marc Fagel, director of the SEC office in San Francisco, said in a statement.
The defendant lives in Scotts Valley, California, according to the SEC. It is unclear whether he has retained a lawyer for his defense. A call to a John Geringer listed in Scotts Valley was not immediately returned.
The SEC filed its complaint with the U.S. District Court in San Jose, California. It seeks the recovery of ill-gotten gains, civil fines, and a freeze on assets in the GLR fund.
The case is SEC v. GLR Capital Management LLC et al, U.S. District Court, Northern District of California, No. 12-02663.
Reporting By Jonathan Stempel in Toronto; Editing by Andrew Hay