The SEC filed a complaint charging Justin M. Paperny of Studio City, California, a former broker with UBS Financial Services, Inc. for his role in fraud involving a hedge fund fraud. The SEC alleged that, from 2002 through 2004, Paperny participated in a fraudulent offering of limited partnership interests in a hedge fund, the GLT Venture Fund, L.P., which raised $14.1 million from 42 investors. The SEC alleged that Paperny was GLT's broker and that he falsely told GLT investors that GLT had access to highly sought after initial public offerings and achieved high average yearly returns.
In reality, according to the SEC, GLT had no access to hot IPOs and suffered substantial losses because of its hedge fund manager's poor trading and his misappropriation of investor funds. The SEC also alleged that Paperny knew that GLT's fund manager made similar false claims to investors but that Paperny nevertheless aided and abetted the hedge fund manager's fraud. Specifically, the SEC alleged that Paperny arranged for new GLT investors to place their funds in GLT through UBS Financial and executed thousands of GLT's securities trades, using funds of GLT and its investors who, Paperny knew, were being defrauded by the fund manager. In exchange, Paperny, according to the SEC, received approximately $220,000 in commissions and in additional payments from the hedge fund manager.
Please click http://www.sec.gov/litigation/litreleases/2008/lr20428.htm for a copy of the administrative order.