Securities Law Blog

MICG Investment Management LLC was shut down by the Financial Industry Regulatory Authority (FINRA) May 12, 2010 for failing to meet its net capital requirement. On May 14, 2010 FINRA filed a suit against the brokerage firm and its chief executive and majority owner, Jeffrey A. Martinovich, for committing securities fraud in its management of the hedge fund MICG Venture Strategies LLC.

MICG and Martinovich allegedly misused investors’ funds and issued false account statements to investors.

According to FINRA’s complaint, MICG and Martinovich improperly assigned excessive asset values to two non-public securities owned by the hedge fund. They allegedly boosted the value of 1.8 million shares of EVP Solar Inc. stock from $1.15 to $2.13 per share just 6 months after MICG purchased the stock. Also, the hedge fund’s interest in the shares of an English soccer club, Derby County FC, was allegedly increased to $7.6 million just one year after purchasing the shares at $5 million.

MICG and Martinovich used those inflated valuations to wrongly charge management and incentive fees of almost $1 million between 2007 and the beginning of 2010.