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Offshore fund’s assets frozen

The SEC has announced it has filed an emergency complaint against an offshore fund and two individuals, charging them with engaging in a fraudulent scheme, and obtained an asset freeze to safeguard remaining investor funds at risk of immediate dissipation.

The complaint alleges that from at least 2018 to the present, Ofer Abarbanel of California and Victor Chilelli of Delaware and New York have engaged in a scheme to defraud investors in an offshore mutual fund they controlled, the Income Collecting 1-3 Months T-Bills Mutual Fund. According to the complaint, Abarbanel represented to investors that the fund would invest primarily in U.S. Treasury securities and also enter into certain types of reverse repurchase agreements with U.S. Treasury securities serving as collateral. As alleged, however, the fund invested only minimally in U.S. Treasuries, and did not enter into any reverse repurchase agreements along the lines described in offering documents. Instead, the complaint alleges, the fund routed nearly all investor funds to shell companies under the defendants’ control as part of uncollateralized sham lending arrangements with the fund. According to the complaint, when investors sought to redeem $106 million in investments last month, the defendants refused and instead took steps to transfer funds to an account from which no redemptions could be drawn.

The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and permanent bars against participating in future securities offerings. The complaint also names as relief defendants six companies that either acted as purported counterparties with the fund or received fund assets in furtherance of the scheme: Institutional Syndication LLC, North American Liquidity Resources LLC, Institutional Secured Credit LLC, Growth Income Holdings LLC, CLO Market Neutral LLC, and Global EMEA Holdings LLC.

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