Criminal Charges Filed Against Massachusetts Advisor For Defrauding Investors

Natasha Taghavi Reporter 11 July 2013

Criminal Charges Filed Against Massachusetts Advisor For Defrauding Investors

The Securities and Exchange Commission has announced that the United States Attorney’s office for the District of Massachusetts has filed a criminal information proceeding against Jeffrey Liskov of Plymouth, MS. 

The one-count criminal information charged Liskov with wilfully violating Section 206 of the Investment Advisors Act of 1940, the authority said. The SEC previously filed a civil action against Liskov and his advisory firm, EagleEye Asset Management, for defrauding advisory clients in connection with foreign currency exchange investments. The factual allegations in the criminal information are substantially similar to those in the SEC's complaint in the civil case, it added.

The SEC’s complaint in the civil case, filed on September 8, 2011, alleged that, between at least November 2008 and August 2010, Liskov made material misrepresentations to several advisory clients to induce them to liquidate investments in securities and instead invest in forex. The forex investments resulted in client losses totaling nearly $4 million, while EagleEye and Liskov came away with over $300,000 in performance fees, in addition to other management fees they collected from clients. The commission alleged that Liskov’s strategy was to generate temporary profits on client forex investments to enable him to collect performance fees, after which client forex investments declined in value.

According to the SEC’s complaint, Liskov made material misrepresentations or failed to disclose material information to clients concerning the nature of forex investments, the risks involved in forex, and Liskov’s poor track record in forex trading for himself and other clients. The SEC’s complaint further alleged that, as to two clients - without their knowledge or consent - Liskov liquidated securities in their brokerage accounts and transferred the proceeds to their forex trading accounts where he lost nearly all their funds - but not before first collecting performance fees on temporary profits in these accounts.

On November 26, 2012, after an eight-day trial in the SEC’s civil action, a jury found that EagleEye and Liskov violated Section 10(b) of the exchange act and rule 10b-5 thereunder and section 206(1) of the advisors act. After a further hearing, US district court judge William Young found violations by EagleEye and Liskov of Section 204 of the advisors act and rule 204-2 thereunder, concerning their recordkeeping obligations relating to EagleEye’s advisory business. 

On December 12, 2012, the court entered a final judgment against EagleEye and Liskov in the commission’s civil action, ordering that they be permanently enjoined from future violations of the foregoing provisions of the securities laws. The court ordered EagleEye and Liskov to pay disgorgement of their ill-gotten gains in the amount of $301,502.26, plus pre-judgment interest on that amount of $29,603.59. The court also ordered EagleEye and Liskov each to pay a civil penalty of $725,000.

On December 27, 2012, the SEC instituted public administrative proceedings against each of EagleEye and Liskov to determine what sanctions against them, if any, may be appropriate and in the public interest.

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