U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21739 / November 15, 2010
SEC v. Amit Mathur, Entrust Capital Management, Inc., and Raheev Johar, No. 05-CV-10729-MLW (District of Massachusetts, filed April 12, 2005)
Court Enters Final Judgment Against Investment Adviser and Its Principal Accused of Misappropriating Client Funds
The Securities and Exchange Commission announced today that the Massachusetts federal district court entered a Final Judgment by consent on November 10, 2010 against defendants Amit Mathur and Entrust Capital Management, Inc. and relief defendant AMR Realty LLC, in connection with a civil injunctive action previously filed by the Commission. The Final Judgment enjoined Entrust and Mathur, its principal, from engaging in future violations of the antifraud provisions of the federal securities laws and held all three defendants jointly and severally liable for $12,572,237.28 in disgorgement.
The Commission filed its action against Mathur and Entrust, an investment advisory firm based in Worcester, Massachusetts, on April 12, 2005 and filed an Amended Complaint adding Raheev Johar, Mathur’s partner at Entrust, as a defendant on September 14, 2005. The Commission’s Amended Complaint alleged that, from 2000 through 2005, the defendants engaged in a scheme to defraud investors in a purported hedge fund run by Mathur and Johar at Entrust. The Amended Complaint alleged that approximately twenty clients invested over $16 million with Entrust. The Commission alleged that the defendants made material misrepresentations to investors about, among other things, their assets under management and returns that the fund generated. According to the Amended Complaint, the defendants dissipated most of the $16 million invested through undisclosed trading losses and misappropriation of investor funds for the defendants’ personal use. The Commission’s Amended Complaint further alleged that Mathur, Johar, and Entrust transferred at least $1 million in investor funds to AMR Realty, a real estate investment company controlled by Mathur, which the Commission alleged had no legitimate interest in the funds. The Court, on April 12, 2005, entered a temporary restraining order and asset freeze against Mathur and Entrust and an asset freeze against AMR Realty and on September 21, 2005 entered a preliminary injunction and asset freeze against Johar. A Final Judgment by consent was entered against Johar in the Commission action on June 4, 2007, which, among other things, ordered him to pay over $600,000 in disgorgement of ill-gotten gains, prejudgment interest, and penalties. In separate administrative proceedings, the Commission issued an Order by consent on June 26, 2007, barring Johar from association with any investment adviser.
In a parallel criminal case against Mathur prosecuted by the United States Attorney for the District of Massachusetts, Mathur was found guilty by a jury in May 2008 on federal mail and wire fraud charges for defrauding his investment advisory clients. A federal judge sentenced Mathur in May 2009 to ten years in federal prison. Upon release from imprisonment, Mathur will be placed on supervised release for three years. The Court also ordered Mathur to pay restitution in the amount of $12,572,237.28 and a special assessment of $2,000.00. In separate administrative proceedings following Mathur’s criminal conviction, the Commission issued an Order by consent on July 14, 2008, barring Mathur from association with any investment adviser.
The Final Judgment against Mathur, Entrust, and AMR Realty enjoined Mathur and Entrust from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Judgment further held Mathur, Entrust and AMR Realty jointly and severally liable for $12,572,237.28 in disgorgement, to be satisfied in part by the transfer of assets currently subject to the Court’s preliminary injunction and asset freeze to the registry of the court in the criminal action. Upon completion of that transfer, the remainder of the disgorgement obligation in the Commission action is deemed satisfied by entry of the criminal restitution order.
For more information, see Litigation Release Nos. 19181 (April 13, 2005), 19195 (April 20, 2005), 19396 (September 27, 2005), 20143 (June 5, 2007), 20590 (May 20, 2008), and 21037 (May 13, 2009). See also Advisers Act Release Nos. 2611 (June 26, 2007) and 2754 (July 14, 2008).