But then the partial government shutdown hit and the Securities and Exchange Commission's case went into purgatory, with all court proceedings put on hold.
In the ensuing weeks, one of the few SEC cops still on the beat put what seemed to be a reasonable request to the fund manager, Statim Holding's Joseph Meyer.
As long as the case was stayed, would Meyer agree not to pull assets from a Statim hedge fund. Meyer refused, the regulator said in a Jan. 17 court filing. Now, SEC attorneys are seeking an injunction to bar Meyer from withdrawing funds, the filing shows.
Meyer's lawyer, Steve Sadow, disputes that his client did anything wrong.
"Mr. Meyer and Statim Holdings Inc. will respond in detail to the SEC's allegations," Sadow said in an emailed statement. "But suffice it to say for now that we dispute the allegations, will vigorously contest them in court and look forward to vindication by a open-minded, fair and impartial jury."
SEC's Hibernation
The Meyer enforcement action highlights that in ways both big and small, the longest-ever government shutdown is making it difficult for federal agencies to do their jobs.
At the SEC, a crucial responsibility is protecting investors from fraud. With the regulator's staff shrinking to about 300 from more than 4,500, it's all but stopped opening investigations.
Meyer's eye-popping returns — in one year he said he posted a 91 percent gain — and his pledge to protect clients from losses were detailed in a July 2016 Bloomberg article.
The SEC says the profits were a fallacy. In the suit it filed against Meyer and Atlanta-based Statim last month, the agency outlined multiple allegations of misconduct, including that Meyer used investors' cash to pay his living expenses and that he doctored financial statements to deceive clients into believing he wasn't losing money.
"The purported guarantees and loss protection were illusory," the SEC said in its Dec. 26 complaint. In some instances, "Meyer simply concocted numbers that had no apparent connection to any share class and then reported these exaggerated returns to investors."
Millions or Billions?
A federal judge in Atlanta set a Feb. 19 hearing on the SEC's request that Meyer be barred from pulling assets.
Bloomberg reported in the 2016 article that Statim was being investigated in Georgia, citing a statement from the state's then secretary of state. The SEC opened its own probe into Statim a week after the story was published, regulatory filings later showed.
It's unclear how much money Meyer manages. Statim disclosed in an April 2018 regulatory filing that it oversees $32.9 million. But since 2013, Meyer has told some investors that the firm manages several hundred million, according to the SEC. And in April 2015, he told one prospective client that Statim had $1.8 billion, the SEC said.
Meyer said in an interview for the 2016 article that his fund's returns were driven by a computerized trading system that he'd designed. He also said most the fund's investments were in Treasury bonds. Statim's Arjun fund rose 24 percent in 2015, 91 percent in 2014 and 13 percent in 2013, Meyer said in an email at the time.
No Treasuries
Contrary to what he told Bloomberg and prospective clients, the firm didn't own any Treasuries between late 2013 and August 2016, according to the SEC's complaint.
As of Aug. 31, 2016, a third of the fund was invested in an exchange-traded fund that tracks the spot price of gold and 37 percent was invested in another ETF that tracks three times the performance of the S&P 500, the agency said.
The SEC said Meyer borrowed from the Arjun fund both directly and indirectly for his personal use, employing a series of transactions to obfuscate the loans.
Meyer would borrow money from Arjun, marking it as a "receivable" owed by Statim to the fund in order to mask declines in the fund's net-asset value, according to the regulator.
Though Statim filings dating back to at least 2011 said the firm didn't charge funds performance fees, the SEC alleged that it actually withdrew $14.3 million in what it called "incentive allocation" between Nov. 2009 and March 2018.
