SEC Halts Alleged Ongoing $39 Million Fraud by Hedge Fund Adviser
The Securities and Exchange Commission today announced fraud charges against Detroit-based EIA All Weather Alpha Fund I Partners LLC (EIA) and its sole owner, Andrew M. Middlebrooks, for allegedly engaging in a multi-year scheme that included the misappropriation and misuse of investors’ funds. To halt this alleged ongoing fraud, the SEC sought, and on May 19, 2022 obtained, emergency relief from the U.S. District Court in the Eastern District of Michigan, including a temporary restraining order against EIA and Middlebrooks and an asset freeze against the defendants and named relief defendants.
According to the SEC’s complaint, unsealed yesterday, from at least mid-2017 to April 2022, EIA and Middlebrooks deceived investors in their hedge fund, EIA All Weather Alpha Fund I, LP, including by making repeated false statements about the fund’s performance and total assets; providing falsified investor account statements; misrepresenting that the fund had an auditor; and creating and disseminating a fake audit opinion to investors. The SEC’s complaint also alleges that EIA and Middlebrooks misused new investor money to make Ponzi-like payments to other investors in the fund in order to continue to deceive investors into believing that the fund was profitable. According to the complaint, Middlebrooks also misappropriated investor funds for personal use, including for jewelry and credit card payments.
“As we allege in the complaint, Middlebrooks lured investors by touting extraordinary performance returns and then concealed the truth of his fraud, including by fabricating documents provided to investors,” said C. Dabney O’Riordan, Co-Chief of the Asset Management Unit. “Our swift action is intended to protect investors from future harm.”
The SEC’s complaint, filed in the Eastern District of Michigan, charges EIA and Middlebrooks with violating the antifraud provisions of the federal securities laws and further charges Middlebrooks with aiding and abetting EIA’s violations of the Investment Advisers Act of 1940. The SEC seeks injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties against EIA and Middlebrooks. The SEC also named EIA All Weather Alpha Fund I, LP, EIA All Weather Fund Partners II, LLC, and Shop Style Shark, LLC as relief defendants.
The SEC’s investigation, which is continuing, is being conducted by Marc D. Ricchiute and Heather E. Marlow of the Asset Management Unit and Tracy W. Bowen in the Denver Regional Office. It is being supervised by Kimberly L. Frederick. The SEC’s litigation is being conducted by Zachary T. Carlyle and Kenneth Stalzer and is being supervised by Gregory A. Kasper.
If you are an investor in EIA All Weather Alpha Fund I, LP and wish to contact the SEC staff, please send an email to EIAInvestors@sec.gov.