The SEC filed SEC v. Silver in the United States District Court, Southern District of New York on April 13, 2021, claiming Defendant Silver orchestrated and carried out a string of frauds to cover up tens of millions of dollars in losses on bad bets to keep his investment advisory business afloat. Specifically, the complaint alleges violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933.
Defendant Silver was the co-founder, managing partner, and chief operating officer of his business, International Investment Group LLC (“IIG”), which specialized in advising clients in investments in emerging market economies. IIG formed three private funds with stated strategies of investing trade finance loans marketed to qualified institutional investors.
Beginning in 2007, Defendant Silver allegedly engaged in deceptive acts to misrepresent performance of and conceal losses in the private funds, including overvaluing portfolio assets and replacing non-performing assets with fictitious assets. Specifically, Defendant Silver began removing defaulted loans in the funds from IIG’s books and replacing them with fictitious loans to different borrowers. Defendant Silver’s practice of overvaluing loans, including valuing worthless fictitious loans, resulted in IIG receiving management and performance fees it was not entitled to and created liquidity problems. In order to meet liquidity needs, Silver securitized one of its loan portfolios to purportedly direct money to borrowers but instead directed the money to secret shell companies owned by IIG. Because IIG’s liquidity problems persisted, Silver created a new fund with a new anchor investor in order to fund his other private funds with fictitious assets.
The SEC has charged Silver with violating multiple sections of the Investment Advisors Act, Securities Act, and Securities Exchange Act in connection with this scheme, praying for disgorgement, civil penalties, and a restraining order.