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Hedge Fund Misuse Of Funds Found By The SEC

Sep 17, 2014 12:21 PM EDT | By Staff Reporter

Archer Advisors' hedge fund manager Steven Markusen and his co-conspirator Jay Cope was accused by the SEC to be siphoning off money from its investors by declaring invoices on non-existent research fees and manupulating stocks on the company's hedge fund portfolio.

SEC said that Markusen and Cope had created false invoices to get investors to pay for research expenses and fees from the year 2008 until 2013. Markusen allegedly expensed the two funds for roughly $500,000 in research fees. They also biiled the funds an additional $550,000 to pay Cope's salary as well as his expenses as an external research consultant when in fact, Cope is actually a regular employee of Archer.

Markusan and Cope also engaged excessive trading activities everyday to rack investors of more fees. They were also artificially inflating the price of one of it's largest stock holdings, CyberOptics Corp during the end of the month. The pair allegedly pumped cash into the system minutes before the market close, forcing the stock value to rise. If the stock price of their largest holdings is up, the value of the entire fund will be higher. Based on the fund;s NAV or net asset value, the pair will be getting higher amount of fees from its investors.

Archer Advisors LLC is a hedge company based in Minneapolis created on the year 2002. The company ran two hedge funds with $36 million in managed funds from more than 60 investors. The hedge fund company stopped its operations last October 2013.

This week, a lawsuit was filed in the U.S. District Courts of Monneapolis by the Securities and Exchange Commission against Markusen and Cope. SEC is allegedly claiming that both fund managers violated anti-fraud provisoons of federal securities laws and some reporting regulations.

As of this moment, both Markusen and Cope could not be reached for comments.

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