BLOOMFIELD HILLS, Mich. (HedgeWorld.com)–Ryan J. Fontaine was charged with fraud by the Securities and Exchange Commission after shares in the hedge fund he created were offered over the Internet.
The commission's complaint names Mr. Fontaine and Simpleton Holdings Corp. (a.k.a. Signature Investments Hedge Fund) as defendants in the case. A 22-year-old college student living at home with his parents, Mr. Fontaine allegedly offered shares of Signature Investments Hedge Fund from at least July through Oct. 22.
The offering allegedly made false and misleading statements about the hedge fund's track record, the amount of assets Signature managed and Signature's purported affiliation with service providers. Mr. Fontaine used a web site, a prospectus and emails to drum up cash from investors and prospective investors.
According to the SEC's complaint, investors were told that Signature averaged over a 39.5% annual return over its 13-year history, including returns of over 21% a year during the bear market of the last two years. He also allegedly claimed that Signature had US$250 million under management, that Salomon Smith Barney was the subadviser to the firm and KPMG LLP was its auditor and that investor's funds were being held in trust at the Delaware Charter Guarantee & Trust Co.
In Signature's prospectus, investors found Fontaine Holdings listed as Signature's investment adviser and Matthew Backaitis, a high school friend of Mr. Fontaine, named portfolio manager and chief analyst. Mr. Backaitis never provided any portfolio management or analytical services to Signature.
