Marin County Investment Advisor Accused By SEC Of $4.5 Million Fraud

Marin County Investment Advisor Accused By SEC Of $4.5 Million Fraud

James Michael Murray, 42, of Larkspur, Marin County, stands charged by the SEC of using a false audit report to raise more than $4.5 million for investing in a hedge fund stated to invest in domestic equities.

In its lawsuit in a U.S. District Court, the SEC has accused Murray of inducing investors to invest in his fund, Market Neutral Trading, by presenting a report issued by an apparently legitimate audit firm.  The report, which in reality was issued by “a Murray-controlled shell company”, exaggerated the profits generated by the fund by almost 90 percent, the SEC claims.  The Commission, in its lawsuit, is seeking disgorgement of fraudulent gains and additional penalties.

Murray solicited funds for investing in Market Neutral Trading, a hedge fund purported to be an investor in domestic equities, raising about $2 million in 2008 from three investors and $2.6 million in 2011 from seven investors, according to the SEC.

Murray used an audit report in 2009, issued by Jones, Moore & Associates, that confirmed Market Neutral’s financial statements, but exaggerated its income, capital and assets, while understating expenses, says the SEC.

Jones, Moore & Associates, the auditing firm, had its own website, but according to the SEC, at least five of the 12 professional employees listed on it, including Jones and Moore, were fictitious.  The SEC further charged that no registration of such a firm was found in Delaware, where it supposedly functioned as an accounting firm.

On Wednesday, San Francisco federal prosecutors also charged Murray in a criminal case for wire fraud relating to credit card transactions – a merchant bank allegedly lost $350,000 when it covered losses suffered by Murray’s customers, last year.

Murray is currently in custody pending a hearing Tuesday that will consider a request by prosecutors to hold him in jail without bail during the pendency of the criminal case, according to Jack Gillund, spokesman for Attorney Melinda Haag.

According to the SEC, Murray applied for brokerage accounts in the capacity of the accounting firm’s chief financial officer, and that one of these accounts was at the bank which suffered credit card losses in the criminal case.

“Murray conjured up an accounting firm and deliberately faked the audit to induce investors into believing the fund was in better shape than it actually was,” said Marc Fagel, director of the SEC’s San Francisco office, in a statement.

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