The SEC amended its complaint against MK Capital Mgmt LLC and majority owner, Francisco Illarramendi.  Originally charged with misappropriating at least $53 million in investor assets, they're now charged with engaging in a multi-year Ponzi scheme involving hundreds of millions of dollars. 

In a parallel action today, the U.S. Attorney’s Office in Connecticut unsealed criminal charges against Illarramendi for the same misconduct as well as for obstruction of justice for deliberately misleading the SEC staff during its investigation.

    SEC Allegations.   Illarramendi and MK Capital Mgmt – which is not registered with the SEC – allegedly misappropriated investor assets and misused 2 hedge funds they managed for Ponzi-like activity.  During the SEC’s investigation in December 2010 and January 2011, Illarramendi attempted to hide the fact that his hedge funds were missing assets by providing the SEC staff with a false letter from an accountant in Venezuela that purported to verify the existence of approximately $275 million in assets held by one of the funds. Those assets do not exist.

As majority owner of the Michael Kenwood Group LLC – a holding company for investment adviser Michael Kenwood Capital Management LLC and other entities, Illarramendi managed several hedge funds, including one that purportedly held up to $540 million in assets. Due to Illarramendi’s alleged misappropriation and his Ponzi activity, the funds hold assets worth substantially less than that amount.

The SEC complaint also names the following Illarramendi-controlled entities as relief defendants:  Michael Kenwood Asset Mgmt LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP.

The SEC’s investigation is ongoing.   [SEC PR 11-62, 3/7]