FINRA has expelled MICG Investment Management, LLC of Newport News, VA, and barred CEO and majority owner Jeffrey Martinovich for committing securities fraud, misusing investors' funds and issuing false statements to investors in connection with their management of a proprietary hedge fund, MICG Venture Strategies, LLC.

MICG and Martinovich are allegedly assigned excessive asset values to 2 non-public securities owned by the hedge fund, and used that excessive value to enrich themselves with 'unjustified' management and incentive performance fees.  Martinovich also is alleged to have fraudulently induced an elderly, non-accredited MICG customer to invest $75,000 in Venture Strategies.

    FINRA Allegations.  In order to inflate their management and incentive fees in 2007 and 2008, which were dependent on the value of the hedge fund's assets, the B/D and CEO assigned unjustifiably high values to the assets - instead of relying on independent or legitimate valuations or valuation methods - e.g., at times, equity interests were valued at 300% the contemporaneous offered price.  In addition, ...

• In mid-2007, MICG and Martinovich purchased 1.8 mn shares of EPV Solar Inc. for about $1.15 a share, but arbitrarily valued the holdings at $2.13 a share as of 12/12/07.  FYI, EPV was a private company and there was no public trading in its stock.   This apparent overstatement resulted in incentive management fees of $337,000 for 2007.

• Venture Strategies investors received false and misleading account statements, that were contained material misrepresentations and omissions in its PPM (private placement memoranda).

• In December 2008, Martinovich recommended and sold to an elderly, non-accredited investor a $75K purchase of Venture Strategies units without having reasonable grounds for believing the investment was suitable for him.  Martinovich also failed to tell the customer that Venture Strategies needed the funds to pay incentive and/or management fees from which MICG and Martinovich would derive financial benefit.

For further detail, go to:   [FINRA News Release, 3/9]