The Securities and Exchange Commission (“SEC”) has alleged that MiddleCove Capital LLC, a Connecticut based investment adviser firm, and Noah Myers, its founder, engaged in fraudulent allocation of trades from October 2008 through February 2011 when Myers made block purchases of securities through a master account and waited to allocate those trades until late in the day, or the next day, after he knew whether there was a gain or a loss on the trade. According to the SEC administrative order, Myers would sell a security and allocate that day-trade profit to his personal and business accounts, if the security increased in price the day it was purchased. Pursuant to the SEC order, Myers generally allocated the trade to a client, if the security’s price failed to increase the day it was bought. The SEC order stated that “the securities on which Myers was disproportionately making money were the same securities on which his clients were disproportionately losing money.” Reportedly, Myers made $460,000 for himself, while losing $2 million for his clients. In addition, the SEC found that the fraud involved the use of leveraged exchange-traded funds (“ETFs”), which are investments that attempt to deliver returns that represent a multiple or inverse of a particular stock index’s return. Leveraged ETFs can be volatile and risky and should be used only by sophisticated investors. The fraud was reportedly first detected by an internal program at Charles Schwab & Co. Inc., the custodian for MiddleCove client accounts and for the master account Myers used for the block trades. In a November 2011 interview with the SEC, Myers admitted to using a day-trading strategy in a personal account that was profitable 95% of the time, “but he did not offer a plausible explanation for his stellar day-trading performance.” The SEC administrative order institutes civil proceedings against Myers. If found liable, Myers could face fines and the SEC can demand disgorgement of profits plus interest from him and his firm, MiddleCove.
If you have suffered losses from investments with MiddleCove, Myers or any other investment adviser firm or brokerage firm, and believe that you are a victim of sales practice abuses, please contact Lax & Neville LLP for a consultation at (212) 696-1999. Our firm has extensive experience and knowledge representing victims of investment fraud nationwide.