At least 20 investors from 15 states were scammed into investing $2.6m into a fake mutual fund run by alleged fraudsters who have so far managed to evade authorities, according to a Securities and Exchange Commission (SEC) filing.
The SEC last week outlined fraud charges against Archer Capital Management Group, its nonexistent Archer Growth fund and two related LLCs while acknowledging that it hasn’t caught the fraudsters, ‘whose true identities are unknown,’ per a federal complaint filed in Florida.
The scheme ran throughout 2020 and involved the publishing of fake news articles, market commentary, fund documents, press releases and the creation of a fake CEO, dubbed ‘David Abelman.’
The strategy was supposedly an all-cap growth fund leaning predominantly toward technology and healthcare stocks that invested in giants like Microsoft and Apple as well as smaller high performing companies such as Seattle Genetics and Edwards Lifesciences. The strategy required a $5,000 initial investment, offered an expense ratio of 0% and purportedly only charged a performance fee between 3% and 9%.
‘In reality, there was never an operating Archer Fund,’ the SEC said. ‘All statements made by the Defendants on the website, on LinkedIn, in the Annual Report and Prospectus, in the articles, and in the press release were false.’
The scheme involved a bank account set up at Wells Fargo using a fictitious name and a fake Lithuanian passport and stock images of several supposed company executives with mock LinkedIn pages, according to the SEC complaint.
Victims seeking to become clients were able to open accounts by providing basic personal information, a copy of a government ID and a utility bill and would wire checks to the scammers via two separate companies called HDR and Silvermoon.
A website created to tout the fake Archer Growth strategy said that it’s average annual return was 47% and that the firm could offer ‘over 30 years of combined experience.’
‘Investors don’t have to pay any fees for poor performance,’ the website said. ‘We strongly believe, that it is fair for the investors and fund managers and the fund’s past performance speaks for itself.’
The money from would-be investors went straight into the fraud itself, the SEC said, noting that ‘a small portion of investor funds was used for personal expenses such as Uber Eats and grocery store bills.’
The scam wound up after the fraudsters forgot to blind-copy current and prospective investors when emailing an October 2020 market update with bogus performance data, the SEC said.
Subsequent emails bounced back, company phone lines went silent and information about Archer disappeared from the web. All money had been transferred out of the country as of October 14, 2020.