The Securities and Exchange Commission has charged the founder and CEO of New York-based firm Vicis Capital for breaching his fiduciary duty by orchestrating conflicted transactions through the hedge fund.
Shadron L. Stastney agreed to pay more than $2.9 million to settle the charges and has also been barred from the investment advisory industry for at least 18 months, but will be allowed to wind down Vicis Capital in the meantime.
The SEC alleged that Stastney authorized Vicis to purchase $7.5 million of illiquid securities that he partly owned. Stastney received $2 million of the proceeds, but never reported his stake in the assets being purchased by the hedge fund to Vicis’ chief financial officer, chief compliance officer or trustee.
Julie Riewe, co-chief of the SEC enforcement division’s asset management unit, said in a statement that “fund advisers cannot sit on both sides of a transaction as buyer and seller without the consent of the clients who rely on them for unbiased investment advice.”
Stastney has neither addmitted or denied the charges.
Founded in 2004, Vicis managed about $5 billion in assets at its peak in 2008.