New Canaan hedge fund manager Greg Imbruce is back in the hot the seat. I reported for Growth Capitalist that high net worth investors from Connecticut and Texas filed an explosive amended complaint that says Imbruce took his largest investors’ money and represented to his other limited partners that it constituted his own personal investment. A former staffer for Imbruce’s ASYM funds, as well as a multitude of other limited partners, all swore in signed statements to the Connecticut Banking Commission that Imbruce lied to them about having ‘skin in the game’ when he was soliciting investments into his funds. This is similar behavior to how we saw the SEC come down on two other local CT hedge funds Aladdin Capital and New Stream.
In recent months Imbruce investors voted him out as general partner in a move to eliminate him profiting from the possible sale or IPO of an oil gas portfolio company the funds own called Starboard Resources. Starboard filed SEC documents this month that show it intends to go public. A transaction Imbruce could profit handsomely from if he did not have issues with looming securities violations in the state of Connecticut and Texas. Either state could issue cease and desist order. But Imbruce isn’t taking this sitting down and refuses to go, claiming as General Partner (with funds he allegedly didn’t actually invest) he gets to vote along side his limited partners on his ousting as the hedge fund manager. Investors are now basically dependent on the old laws the Connecticut Banking Commission had, before the implementation of Dodd Frank, to help them ban Imbruce as an investment advisor and take away his ability to earn performance fees.
A letter seen by Growth Capitalist shows how the Connecticut Banking commission, under Howard Pitkin’s reign, is responding to funds with smaller amounts of assets under management. Imbruce had asked to be exempt and not fined for failing to file with the state that he is conducting business in as an investment advisor. But the Banking Commission denied his request and issued an opinion that he DID have to register with the state. They also warned him regardless of if he registered with them or not they could still come after him for fraud. The banking commission doesn’t have the ability to charge Imbruce criminally but does refer financial fraud cases to the Justice Department. If Justice got involved they could charge Imbruce with wire fraud for his alleged false statements made in marketing materials sent to investors in other states. I previously reported on the Banking Commission investigation into Imbruce for Growth Capitalist in March.
Now I’ve learned his investors in Texas filed a complaint with the Texas Banking Commission on June 16th and the Texas regulators have responded they are looking at the complaint. Still, the investor fraud lawsuit against Imbruce has been going on for one year now with slow progress made on getting him to settle or leave the fund. Investors did force him off the board of Starboard and took away his control of the company. Also 87.5% of investors in all three funds Imbruce runs finally voted to remove him as the hedge fund manager. They replaced him with Charles Henry III who is not taking fees to run the fund and is also a limited partner. Henry is there to basically collect votes now.
Imbruce tried a tricky legal tactic this January when he offered his investors rescission and restitution of their full investment into the fund plus 6% interest. This means he planed to give them back their full investment if they stopped suing him. Imbruce hoped if the investors did not respond within 30 days to the rescission deal they could not have sued him in CT state court for securities fraud. But the lawsuit shows investors learned Imbruce didn’t have the millions he promised to pay back in a bank account. In Texas this false promise, which reads like writing a bad check to get a deal done, can be a civil fraud charge.
Texas Securities Act section 33H (1) says
The offer shall include financial and other information material to the offeree’s decision whether to accept the offer, and shall not contain an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
If the investors can prove in court Imbruce didn’t have the cash he made in the rescission offer that’s clearly an untrue statement that would violate the law and might have criminal repercussion.
Imbruce also operates Glenrose Holdings, another investment advisor firm that he refuses to register with the state of Connecticut. That business has recently done deals with investors in a small penny stock called American Petro Hunter. Before he did energy deals for the Madoff family fund (which earned him a FINRA violation) he was analyst on the energy research desk for Jefferies.
Imbruce hired a former enforcement lawyer with the banking commission Rick Slavin to defend him against the Banking Commission investigation and his investors fraud suit. Attorney Slavin of Cohen & Wolf told me, “Mr. Imbruce has only acted in the best interests of all limited partners while achieving significant returns for his investors. Mr. Imbruce has done nothing wrong. Under the circumstances he will respond more completely at the appropriate time.”
Imbruce hasn’t actually paid his investors any returns in recent years or shown them his books even though investors made multiple request. The next step will be for the investors to file a books and records request in Delaware Chancery Court. A move we saw as very fruitful for another New Canaan investor Peter Deutsch. As I previously reported Deutsche was able to get the courts to give his attorney power to do a Marshall raid on the home of a China stock executive involved in ZST Digital. Deutsche as a result got records showing all kinds of fraud and is near a mega million case settlement with the China company.
Imbruce, who is an avid sailor and member of Stamford Yacht Club, recently bought a $2 million home at 92 Turtleback Road in New Canaan. Around the time he learned his investors were going to sue him town records show he transferred the home into his wife Alana’s name for $1 dollar. That transfer is also now part of the investor fraud suit against him with a claim of fraudulent conveyance of assets.
The investor’s attorney (another New Canaan resident) Jonathan Whitcomb would not comment on his clients litigation.