Washington D.C., Nov. 9, 2016 —The Securities and Exchange Commission today charged a former movie producer and self-proclaimed private equity executive with defrauding investors in hedge funds and using the money he stole to support his extravagant lifestyle.
According to the SEC’s complaint, David R. Bergstein of Hidden Hills, California, stole millions from investors in 2011 and 2012 and used the money for purchases with a firearms dealer, an antique watch and jewelry retailer, and a bonsai tree nursery. The SEC’s complaint alleges that the scheme relied on a series of intricate transactions by Weston Capital Asset Management, then a registered investment adviser, with two of its unregistered hedge funds, Weston Capital Partners Master Fund II Ltd. and the Wimbledon Fund SPC Class TT Segregated Portfolio.
In one transaction, the SEC alleges that Bergstein misappropriated at least $2.3 million of money that was purportedly meant for investments in medical-billing businesses and helped Weston Capital Asset Management conceal the true nature of the transaction from Weston investors. In a second allegedly fraudulent transaction, Bergstein stole more than $3.5 million of funds also purportedly meant, in part, for investments in medical-billing businesses.
“The use of elaborate corporate transactions to mask old-fashioned theft of investor monies will not prevent the SEC from enforcing the federal securities laws and protecting investors,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Violators will be held to account no matter the artifice used to perpetrate their frauds.”
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Bergstein and Keith D. Wellner, who was formerly Weston Capital Asset Management’s general counsel, chief compliance officer, and chief operating officer. Wellner previously settled SEC charges filed in federal district court in Florida and has been barred from working in the securities industry.
The SEC’s complaint charges Bergstein with violating Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) and aiding and abetting violations by Weston Capital Asset Management of Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8. The SEC is seeking injunctions, the return of allegedly ill-gotten gains, and monetary penalties.
The SEC’s investigation was conducted by Joseph P. Ceglio, John O. Enright, Christopher Ferrante, and Sheldon L. Pollock, and the case was supervised by Lara Shalov Mehraban of the New York office. The litigation will be led by Kevin McGrath, Mr. Enright, and Mr. Ceglio. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Internal Revenue Service.