The Securities and Exchange Commission has charged New York-based investment advisor Thomas Priore and three of his affiliated firms with fraudulently managing investment products tied to the mortgage markets as they came under pressure in 2007.

The SEC alleges that, at the direction of its owner and president Priore, ICP Asset Management defrauded four multi-billion-dollar collateralized debt obligations by engaging in fraudulent practices and misrepresentations that caused the CDOs to lose tens of millions of dollars. Priore and his companies also allegedly improperly obtained tens of millions of dollars in advisory fees and undisclosed profits at the expense of their clients and investors.

"ICP and Priore repeatedly put themselves ahead of their clients," said Robert Khuzami, director of the SEC's enforcement division. "Instead of acting as fiduciaries, they took advantage of a distressed market to line their own pockets."

According to the SEC's complaint, ICP and Priore caused the CDOs to make numerous prohibited investments without obtaining necessary approvals and later misrepresented those investments to the trustee of the CDOs and to investors.

The prices of many of these investments were intentionally inflated to allow ICP to collect millions of dollars in advisory fees from the CDOs. The SEC further alleges that ICP and Priore executed undisclosed cash transfers from a hedge fund they managed in order to allow another ICP client to meet the margin calls of one of its creditors. Priore subsequently misrepresented the transfers to the hedge fund's investors.

The SEC's complaint also seeks permanent injunctions barring future violations of the federal securities laws, disgorgement of the defendants' ill-gotten gains with pre-judgment interest, and monetary penalties.

The most prominent example of a fraud allegation in connection with sales of CDOs has been that of Goldman Sachs. The SEC has accused the Wall Street titan of selling CDOs while not disclosing to the buyers that it enlisted the help of renowned hedge fund investor John Paulson in choosing securities that he wanted to short-sell. Goldman Sachs vigorously contests the allegations.