BULLETIN: Greater San Francisco Investment Adviser ‘Conjured Up An Accounting Firm’ To Dupe Hedge-Fund Clients, SEC Says; James Michael Murray Of Market Neutral Trading LLC Sued Civily, Charged Criminally

EDITOR’S NOTE: Law enforcement has warned that “shell companies” are playing an increasingly larger role in criminal schemes, as scammers turn to them to sanitize their capers, disguise fraud, disarm skeptical investors and keep large sums of cash flowing.

The threat to the U.S. economy and the corrosive effects on legitimate commerce cannot be overstated in this unprecedented era of securities hucksterism. Not only are investors at risk, so, too, is faith in the marketplace itself. The SEC complaint referenced in the story below includes a mention of a website allegedly used as part of the hedge-fund fraud scheme of James Michael Murray.

UPDATED 4:34 P.M. ET (U.S.A., MARCH 16) The SEC has gone to federal court in San Francisco, alleging that Bay Area investment adviser James Michael Murray duped Market Neutral Trading LLC  hedge-fund investors through a “shell company” he secretly controlled.

Murray, 42, of Larkspur, Calif., also has been charged criminally, the SEC said. Details about the criminal case were not immediately available.

But in the SEC’s civil action, the agency said that Jones, Moore & Associates Ltd. — purportedly an “independent”  Delaware accounting firm that had assessed the hedge fund  — actually was a “shell company” set up by Murray to dupe investors by issuing a “bogus audit report” and embellishing the strength of Market Neutral.

Not only was the accounting firm controlled by Murray illegitimate, “at least five”  purported “professionals” whose names and purported academic pedigrees appear on the shell company’s website “do not exist,” the SEC charged.

Among the figments of Murray’s imagination were “Richard Jones” and “Joseph Moore,” the two named principals of the firm, the SEC charged.

The scam netted at least $4.5 million in spurts between July 2008 and November 2011, the SEC said.

“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 Regional Office.

Read the SEC complaint.