The Securities and Exchange Commission (SEC) has filed an emergency action to halt Pennsylvania-based brothers Sean Hvizdzak and Shane Hvizdzak and a digital asset fund. The Hvizdzaks operated several companies: Hvizdzak Capital Management LLC; High Street Capital LLC; High Street Capital Partners, LLC . Each entity is said to be based in Bradford, Pennsylvania.
The SEC states that Shane Hvizdzak is the Co-Manager and Principal Trader for the HSC and Sean Hvizdzak is the Co-Manager and Operations Director for the HSC. Sean Hvizdzak also appears to be an attorney, according to the SEC.
According to the SEC, the Enforcement Division has obtained a temporary restraining order and asset freeze against the two brothers and three entities they control to “stop an offering fraud and the misappropriation of investor proceeds.”
According to the SEC, from at least July 2019 through May 2020, the Hvizdzaks offered securities in a private fund that purported to invest in digital assets. The SEC claims the two misrepresented the fund performance, fabricating financial statements, and forging audit documents.
The SEC complaint alleges that the Hvizdzaks misrepresented in marketing materials that the fund earned 100.77% and 92.90% on its investments during the third and fourth quarters of 2019. The reality was quite different, states the SEC, as the apparent crypt fund actually lost money in those quarters.
Additionally, the SEC claims the Hvizdzaks diverted investor money to personal bank accounts and crypto-asset trading accounts for their own benefit.
“As alleged in our complaint, the Hvizdzaks touted exceptional, but false, performance to potential investors when offering their fund,” said Adam S. Aderton, Co-Chief of the SEC’s Asset Management Unit. “Investors should be skeptical of claims that seem too good to be true.”
To quote the SEC complaint:
“In all, since Defendants began receiving money for the Fund in July 2019, the HCM Account has received $31 million from third parties. Since July 1, 2019, Defendants transferred almost $26 million from the HCM Account to their personal accounts, or over 80 percent of the funds in the HCM account during that period.”
The SEC complaint, unsealed today in federal court in the U.S. District Court for the Western District of Pennsylvania, charges the Hvizdzaks, Hvizdzak Capital Management, LLC, High Street Capital, LLC, and High Street Capital Partners, LLC with violating the antifraud provisions of federal securities laws.
A hearing is scheduled for June 30, 2020, to consider continuing the asset freeze and the issuance of a preliminary injunction.