Securities and Exchange Commission v. Kinetic Investment Group, LLC, et al., No. 8:20-cv-00394-WFJ-SPF (M.D. Fla., filed February 20, 2020)

On March 6, 2020, the Securities and Exchange Commission obtained an asset freeze and other emergency relief against Florida-based investment adviser Kinetic Investment Group, LLC and its managing member, Michael Scott Williams, in connection with an alleged fraudulent, unregistered securities offering that raised approximately $39 million from at least 30 investors located mostly in Florida and Puerto Rico.

According to the SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, Kinetic Group and Williams fraudulently raised millions of dollars by making material misrepresentations to investors who they solicited to invest in Kinetic Funds I, LLC, a purported hedge fund that they managed. The defendants allegedly represented, among other things, that Kinetic Funds’ largest sub-fund invested solely in U.S.-listed financial products and that at least 90% of its portfolio was hedged using listed options. The SEC alleges, however, that Williams actually invested a significant part of the sub-fund’s assets in a private start-up company owned by Williams. The complaint further alleges Williams misappropriated at least $6.3 million through undisclosed loans to himself and his entities.

On March 6, 2020, U.S. District Court Judge William F. Jung granted the SEC’s request for emergency relief, including an asset freeze and an order for records preservation, against Kinetic Group, Williams, and a number of companies charged by the SEC as relief defendants. The court also granted the SEC’s request to appoint Mark Kornfeld as receiver over Kinetic Group and the relief defendants.

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