New York (HedgeCo.Net) – Minneapolis-based hedge fund manager Steven R. Markusen and an accomplice Jay C. Cope have been charged by the SEC with bilking investors in two hedge funds out of more than $1 million under the guise of research expenses and fees. According to the SEC’s complaint, Markusen and Cope also carried out a portfolio pumping scheme by mani-ting the price of the thinly-traded stock of CyberOptics Corp.

The SEC alleges that when the management fees earned by Archer Advisors LLC begun shrinking due to the funds’ worsening performance, Markusen routinely caused the funds to reimburse Archer for fake research expenses. As if that wasn’t enough, the SEC says that the hedge fund manager devised a way to essentially charge fund investors twice for the same fake research expenses.

First, he billed the funds directly by falsely claiming that Archer had paid Cope to conduct “research” for the funds. Second, he and Cope improperly diverted soft dollars from the hedge funds to Cope for the same purported “research” under the additional pretense that Cope was an independent consultant.

The SEC’s complaint filed in federal court in Minneapolis also charges Markusen and Cope with conducting a separate scheme to mani-te the stock price of the funds’ largest holding in order to inflate the monthly returns reported to investors and conceal the true extent of the funds’ mounting investment losses.

“Markusen and his firm had an obligation to manage investor money in the hedge funds fairly and honestly. Instead, he and Cope exploited their control of the funds to engage in long-running schemes to misappropriate fund -ets and artificially pump up the value of the poorly-performing funds,” said Robert J. Burson, -ociate Director of the SEC’s Chicago Regional Office.

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net

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