U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25984 / April 24, 2024
Securities and Exchange Commission v. Craig Allen, No. 1:24-cv-01771-SDG (N.D. Ga. Filed April 24, 2024)
SEC Charges Atlanta-Based Hedge Fund Manager with Multimillion-Dollar Fraud
The Securities and Exchange Commission today announced charges against Craig Allen for defrauding investors in The Cheetah Fund L.P., an Atlanta-based hedge fund that Allen founded and controlled.
According to the SEC's complaint, during the period between January 2019 and January 2023, Allen raised approximately $9.9 million from investors in the Cheetah Fund by lying about the fund's supposedly superlative performance. In reality, the SEC states, Allen incurred over $4.59 million of realized trading losses in the accounts of the Cheetah Fund and of C.M. Allen, a related company also controlled by Allen. The complaint also states that Allen falsely indicated to investors that the Cheetah Fund used a specific accounting firm as an auditor and to prepare its Schedule K-1 tax forms. Allen's compensation from the Cheetah Fund for managing its portfolio, according to the SEC, was performance-based, meaning that Allen was to be compensated only when the fund profited. But the complaint alleges that, despite incurring heavy trading losses and thus earning little if any legitimate compensation, Allen received at least $2.64 million from the Cheetah Fund and its investors. The SEC claims that, to date, Allen has returned only about $900,000 to Cheetah Fund investors, resulting in investor losses of approximately $9 million.
The complaint, filed in the United States District Court for the Northern District of Georgia, charges Allen with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC seeks a permanent injunction, disgorgement with prejudgment interest, civil penalties, and a permanent officer-and-director bar. The SEC also seeks an injunction that permanently bars Allen from participating in the issuance, purchase, offer, or sale of any security, except for purchases and sales in his own personal accounts.
The SEC's investigation was conducted by Josh Hess, Krysta Cannon, Robert Nesbitt, and Alexander Lefferts, and supervised by Matthew McNamara and Justin Jeffries. The SEC's litigation will be led by William Hicks and Josh Hess and supervised by M. Graham Loomis. The SEC appreciates the assistance of the United States Attorney's Office for the Northern District of Georgia, the State of Connecticut Department of Banking, Securities Division, and the Alabama Securities Commission.