Federal regulators are suing a Utah hedge fund owner over allegations he artificially inflated assets and charged excessive fees.
Russell K. Cannon, 38, of North Salt Lake, is one of three Utahns who have been named in recent actions by the Securities and Exchange Commission.
The SEC sued Cannon over allegations he fraudulently inflated a stock held by his RKC Matador Funds through trades in the last minutes of the final day of the month and by dictating the price the stock was listed at on Matador’s financial reports to clients.
“We disagree with the charges, and we’re going to resist [them] in the complaint,” Michael Coombs, Cannon’s attorney, said Wednesday.
Cannon told Matador investors that he used a five-step process to evaluate shares through two of his fund management companies, RKC Capital and RKC Capital Management, before buying. But instead of using that strategy, most of Matador’s assets were invested in a company called Global Pari-Mutuel Investments Inc., according to the lawsuit filed Monday. Cannon’s father was one of three board members of Global, whose shares made up more than 50 percent of Matador’s assets.
Cannon, whose incentive pay depended on Matador’s performance, then used last-minute trading on the last day of the month to inflate Global’s share price, the SEC says. When that didn’t work well enough, Cannon allegedly provided a false share price in Matador’s monthly brokerage statements.
The SEC asks that Cannon be ordered to halt the allegedly fraudulent activities, pay a fine and disgorge profits.
In other recent SEC actions
• The agency has started administrative proceedings against Brian J. Smart, 35, of Lehi, owner of Smart Assets LLC. Smart and his company last year were found to have violated federal securities laws, fined $2 million and ordered to disgorge $2.6 million of profits.
A federal court had found that Smart and Smart Assets misappropriated more than $2 million from investors through a “systematic program of deception and fraud,” the SEC said.
Instead of placing investors’ money in safe investments as he claimed, Smart used it for personal expenses, invested in risky real estate ventures and hard money loans, and to pay “dividends” to other investors, the agency said.
• The SEC said a Salt Lake City attorney “played a significant role” in a so-called pump-and-dump scheme in Florida that was aimed at taking advantage of the demand for temporary housing after the 2010 earthquake in Haiti.
The SEC sued attorney David Rees as part of its lawsuit against a company called Recycle Tech and six other people.
The suit filed Wednesday in Miami alleges Rees aided in a scheme to inflate the price of Recycle Tech shares and sell them for a profit by preparing legal documents and a false legal opinion letter in return for some of the shares.
The SEC is asking for an order barring Rees from providing legal services to any person in connection with the offer or sale of securities.
Rees did not return an email seeking comment.