SHERMAN, Texas (CN) - The CFO of a company that claimed to be "one of the world's largest private investment firms" aided and abetted a $7.4 million scam in a fund that he knew "did not exist," the SEC claims in court.
The SEC sued Steven McCraw, of Plano, former executive vice president and CFO of KGW Capital Management, in Federal Court.
"KGW Capital was created, owned, and operated by Kevin G. White, also of Plano, and purported to be 'one of the world's largest private investment firms' that raised, invested, and managed 'private equity funds, hedge funds and publicly traded alternative investment vehicles for institutions and high net worth individuals,'" the SEC says in its 14-page lawsuit. "Among the investment alternatives offered by KGW Capital, all of which were unregistered with the Commission, was Revelation Forex Fund, L.P. (the 'Fund'), which White claimed was a 'highly specialized hedge fund' that employed a sophisticated, low-risk, high-return foreign currency ('forex') trading strategy. In addition to serving as the CFO of KGW Capital, McCraw was also the Executive Vice President and Chief Financial Officer of Meridian Propane, LP ('Meridian'), where he was responsible for the day-to-day operations of a propane gas company created and owned by White.
"In fact, White, aided and abetted by McCraw, was operating a fraudulent scheme. On July 9, 2013, the Commission brought an emergency action to halt the scheme. This Court, in SEC v. Kevin White
, et al., Civil Action No. 4-13-cv-0383, issued a temporary restraining order and asset freeze. In that case, the Commission alleged that White made multiple misrepresentations about the Fund and its performance, which actually resulted in more than $2 million in trading losses. The Commission also alleged that White misappropriated investor funds to pay for personal expenses and funded unrelated businesses not disclosed to investors. White raised $7.4 million from investors by the time his activities were halted. The assets of KGW Capital, the Fund, and White's other companies were seized by a Court-appointed receiver.
"McCraw, as the CFO of KGW Capital, was aware of and aided and abetted White's misrepresentations to investors. Specifically, at White's direction, McCraw calculated the performance returns for the Fund for time periods during which McCraw knew the Fund did not exist. McCraw was aware that White then used his performance calculations in various marketing materials concerning the Fund to attract potential investors."
The SEC seeks disgorgement, penalties and an injunction.