[ by Melanie Gretchen ] The SEC charged a Miami-based adviser, its principals and their hedge fund partnership with lying 'through the skin of their teeth' - i.e., they allegedly deceived investors about its executives having "skin in the game," or personal investments in a Latin America-focused hedge fund.  From 2006 to 2008, Quantek Asset Management LLC misrepresented to investors that its fund managers and principals had "skin in the game" in the $1 billion Quantek Opportunity Fund, according to the SEC investigation. SEC Findings and Allegations. The fact of the matter is that Quantek's executives never invested their own money in the fund.  Nevertheless, the hedge fund misled investors about the investment process of the funds it managed as well as certain related-party transactions involving its lead executive Javier Guerra and its former parent company Bulltick Capital Markets Holdings LP. "When making an investment decision, private fund investors are entitled to the unvarnished truth about material information such as management’s skin in the game or the adviser’s handling of related-party transactions.  Quantek’s investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents." -- Bruce Karpati, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. A Matter of Course. Quantek, particularly former Quantek operations director Ralph Patino, misrepresented to investors that management had skin in the game, in response to questions posed in due diligence questionnaires that were used to market the funds to new investors.  Quantek made similar misrepresentations in side letter agreements executed by Guerra when pursuing 2 institutional investors, according to the SEC. Quantek also misled investors about certain related-party loans made by the fund to affiliates of Guerra and Bulltick.  As the fund permitted related-party transactions with Bulltick and other Quantek affiliates, investors were wary of deals that were not properly disclosed. The Game Keeps Going. In 2006 and 2007, Quantek caused the fund to make related-party loans to affiliates of Guerra and Bulltick that were not properly documented or secured at the outset.  To cover their tracks, Quantek and Bulltick employees later re-created the missing related-party loan documents, but misstated key terms of the loans and backdated the materials to give the appearance that the loans had been sufficiently documented and secured at all times.  [CI Note: A mistake or more misrepresentation?] Quantek and Guerra provided this misleading loan information to the fund’s investors. "The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser’s conflicts of interest." -- Scott Weisman, Assistant Director in the SEC Enforcement Division’s Asset Management Unit. Quantek also repeatedly failed to follow the robust investment approval process it had described to investors in the fund, according to the SEC's order.  To conceal this, Quantek provided investors with backdated and misleading investment approval memoranda signed by Guerra and other Quantek principals. SEC Sanctions. Bulltick, Guerra, and former Quantek operations director Ralph Patino are charged along with Quantek in the SEC’s enforcement action.  Without admitting or denying the findings, Quantek, Guerra, Bulltick, and Patino agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges. Quantek and Guerra agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively.  Bulltick agreed to pay a penalty of $300,000, and Patino agreed to a penalty of $50,000.  Guerra consented to a 5-year securities industry bar, and Patino consented to a securities industry bar of 1 year. Going forward, Quantek and Bulltick agreed to censures.  They all consented to orders that they cease and desist from committing or causing violations of certain antifraud, compliance, and recordkeeping provisions of the Investment Advisers Act of 1940 and the Securities Act of 1933. For further details, go to [SEC, 5/29/12] and the [SEC order against Quantek Asset Management et al.].