A private equity manager and his firm were charged with stealing $9 million from investors by the Securities and Exchange Commission on Friday.

A private equity manager and his firm were charged with stealing $9 million from investors by the Securities and Exchange Commission on Friday.

Lawrence Penn III and his Manhattan-based firm Camelot Acquisitions Secondary Opportunities Management, along with Altura Ewers, are alleged to have concocted a sham due diligence arrangement.

Penn allegedly used fund assets to pay fake fees to a front company, Ssecurion, controlled by Ewers. The firm reinvested in companies and accounts controlled by Penn, so he could secretly spend investor funds for other purposes.

“Penn held himself out as an ultra-sophisticated and well-connected investor in the private equity world. Behind the scenes, he disregarded his obligations to the fund’s investors and treated their assets as his own personal and professional slush fund,” said Andrew Calamari, director of the SEC’s New York regional office, in a statement.

The SEC’s complaint charges Penn, two Camelot entities, Ewers and Ssecurion with violating the anti-fraud, books and records, and registration application provisions of the federal securities laws.

Penn is alleged to have raided a network of public pension funds, high net worth individuals and overseas investors to raise assets for his private equity fund, securing almost $120 million in capital commitments.

Despite Penn and Ewers misleading the fund auditors about the nature and purpose of the due diligence fees of the $9.3 million of diverted investor assets, the auditors grew suspicious.

The pair lied to auditors and forged documents in a cover-up attempt up to July last year, claiming the files were generated by Ssecurion.

Since the charge, Penn’s and Camelot’s assets have been frozen, following an emergency court order obtained by the SEC.

The complaint seeks final judgments that would require them to disgorge ill-gotten gains with interest, pay financial penalties, and be barred from future violations of the anti-fraud provisions of the securities laws.  

It also charges another company owned by Ewers – A Bighouse Photography and Film Studio – as a relief defendant for the purposes of recovering investor funds it allegedly obtained in the scheme.

The investigation continues.