[ by Melanie Gretchen ]

Investment adviser EagleEye Asset Management, LLC and its sole principal were found guilty of defrauding advisory clients concerning foreign currency exchange (forex) trading.  On 12/12/12, Judge William G. Young entered a final judgment on the SEC-registered parties in an action the Commission previously filed against them.

SEC Findings and Allegations. Between at least November 2008 and August 2010, Jeffrey Liskov persuaded clients to liquidate investments in securities and invest the proceeds in forex trading.  To this end, he made material misrepresentations failed to disclose material information concerning the nature of forex investments, the risks involved, and his poor track record in forex trading for himself and other clients.  The investments, which were not suitable for older clients with conservative investment goals, resulted in $4 million losses for the victims.

Liskov’s strategy was to generate temporary profits on client forex investments to enable him to collect performance fees, after which client forex investments invariably would sharply decline in value.  All told, the principal and his firm made over $300,000 in performance fees, in addition to other management fees they collected from clients.

Federal Sanctions. After an 8-day trial, the federal jury Boston, MA, found EagleEye and Liskov in violation of these rules:

• Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder
• Section 206(1) of the Investment Advisers Act of 1940
• Section 204 of the Advisers Act and Rule 204-2 thereunder, concerning their obligation to maintain true, accurate, and current certain books and records relating to EagleEye’s investment advisory business

As a result, Judge Young ordered EagleEye and Liskov permanently enjoined from future violations of the foregoing provisions of the securities laws.  They are required to pay, jointly and severally, disgorgement of their ill-gotten gains in the amount of $301,502.26, plus pre-judgment interest on that amount of $29,603.59.  In addition, EagleEye and Liskov must each pay a civil penalty of $725,000.

In its investigation, the Commission was assisted by Secretary of the Commonwealth of Massachusetts William F. Galvin’s Securities Division and the Commodity Futures Trading Commission, both of which filed related cases against the defendants in September 2011.

The SEC case: Securities and Exchange Commission v. EagleEye Asset Management, LLC and Jeffrey A. Liskov, United States District Court for the District of Massachusetts, Civil Action No. 11-CV-11576

For further details, go to [SEC Litigation Release 22570, 12/14/12], [SEC Litigation Release 22086, 9/8/11] and [SEC Litigation Release 22546, 11/27/12].