The operators of an offshore mutual fund that told investors it would invest their money in Treasury securities have been charged with misappropriating investor funds to buy Treasuries for themselves.

The U.S. Securities and Exchange Commission said Ofer Abarbanel, 46, and Victor Chilelli, 51, have engaged in a scheme to defraud investors in their Income Collecting 1-3 Months T-Bills Mutual Fund from at least March 2018 to the present.

The fund’s prospectus represented it would invest primarily in Treasuries with remaining maturities of one to three months but according to the SEC, Abarbanel and Chilelli transferred investor funds to shell companies they controlled and then used the money to “engage in various transactions for their own benefit,” including Treasury purchases.

Of the $191 million they raised from one investor group, about $102 million was allegedly invested in a brokerage account in the name of shell company North American Liquidity Resources.

The SEC said it had obtained a freeze on fund assets as the investor group seeks to redeem about $106 million it invested.

“The SEC will move quickly to protect investor funds from potential dissipation and misappropriation,” Carolyn M. Welshhans, associate director in the SEC’s Division of Enforcement, said in a news release. “We can detect misconduct and enforce the securities laws even where, as we allege happened here, fraudsters transfer and divert funds to shell companies.”

According to the SEC, Abarbanel, an Israeli citizen, “has exercised control over the fund, with the substantial assistance of Chilelli,” who allegedly founded the shell companies and set up their bank and brokerage accounts.

After registering the fund in March 2018, Abarbanel and Chilelli released a prospectus in January 2019 that said they would invest in Treasuries and reverse repurchase agreements backed by Treasuries. The counterparties for the reverse repos would be well-established financial institutions such as banks and insurance companies.

Arbabanel and Chilelli transferred investor funds to the shell companies, the SEC said, in exchange for an unsecured and uncollateralized loan agreement and then caused those entities to purchase securities in their own accounts, often on margin.

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