Published on May 29th, 2014 | Posted in Articles

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Chicago-based investment fund manager accused of stealing money he raised from investors to pay personal and business expenses.

The SEC alleges that Neal V. Goyal told investors that the private funds he managed would invest in securities following a “long-short” trading strategy.  However, Goyal actually did little trading and simply operated a Ponzi scheme that used new investor funds to pay redemptions to existing investors and fund his own lavish lifestyle.  Goyal concealed the poor results of the few investments he did make by sending investors phony account statements that grossly overstated the performance of the funds.

In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois today announced criminal charges against Goyal.

“From the beginning of his scheme, Goyal lied to investors and created fake account statements portraying positive trading returns in order to gain their trust and attract additional investments,” said David Glockner, director of the SEC’s Chicago Regional Office.  “Goyal’s limited trading was unsuccessful, and he stole the vast majority of the money he raised.”

According to the SEC’s complaint filed in federal court in Chicago, Goyal raised more than $11.4 million in the last several years for investments in four private funds that he managed and controlled.  Goyal’s investment strategy lost money from the outset, but he hid those losses from investors through the Ponzi payments and phony account statements.  Meanwhile, Goyal misused investor funds to make down-payments and pay the mortgages on two homes he purchased.  He also siphoned away investor money to invest in a Chicago tavern, fund two children’s clothing boutiques that his wife operates in Chicago, and purchase artwork and lavish furniture. 

The SEC’s complaint filed on May 28 charges Goyal and two investment advisers that he owned and controlled –Blue Horizon Asset Management and Caldera Advisors – with violating the antifraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934 and Rule 10b-5, and Investment Advisers Act of 1940.  The SEC is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and a permanent injunction against Goyal, Blue Horizon Asset Management, and Caldera Advisors.  The SEC named another Goyal-controlled entity Caldera Investment Group as a relief defendant in its complaint for the purpose of recovering any investor funds it received. 

At the SEC’s request, Judge Rebecca R. Pallmeyer issued a permanent injunction and asset freeze on May 28 against Goyal and his firms, who consented to the order without admitting or denying the allegations in the SEC’s complaint.  Under the court’s order, monetary remedies will be decided at a later date.

The SEC’s investigation was conducted by Richard G. Stoltz and supervised by Robert J. Burson in the Chicago Regional Office.  The SEC’s litigation will be led by Benjamin Hanauer.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of Illinois and the Chicago division of the Federal Bureau of Investigation.