Civil and criminal authorities filed charges against a Chicago fund manager alleging that he ran a Ponzi scheme that took in more than $11 million from investors. Neal V. Goyal, 33, was the subject of an emergency civil enforcement action filed yesterday brought by the Securities and Exchange Commission. In a parallel criminal action, federal authorities charged Goyal with a single count of wire fraud. The Commission's action is seeking injunctive relief, disgorgement of ill-gotten gains, and civil penalties, while Goyal could face up to twenty years in prison on the criminal charge.
Goyal owned and managed two investment advisors: Blue Horizon Asset Management ("Blue Horizon") and Caldera Advisors, LLC ("Caldera"). Blue Horizon and Caldera, neither of which is registered with the Commission, act as investment advisers to four investment funds created by Goyal (collectively, the "Funds"). Beginning in 2006, while he was attending law school at the Thomas Jefferson School of Law, Goyal began raising funds from friends and family members. Potential investors were told that the Funds primarily invested in equities, and employed a "long-short" strategy that involved holding both long and short positions. According to account statements provided to investors from 2011 to 2013, the Funds returned at least 17% per year. In total, Goyal raised more than $11 million from at least 35 investors.
However, Goyal was not the savvy trader investors were led to believe. Indeed, his initial trading resulted in substantial losses, and he ceased trading completely by January 2009. Instead, Goyal used investor funds to pay returns to existing investors - a classic hallmark of a Ponzi scheme. Additionally, Goyal misappropriated investor funds to sustain his lavish lifestyle, including more than $1 million for two homes, more than $200,000 in investments in a Chicago tavern, luxury vacations and custom-tailored suits, and $100,000 for a children's clothing boutique operated by his wife. Indeed, despite the fact that his wife's children's clothing boutique was losing money, Goyal used investor funds to help the business expand to a second location.
The Commission's complaint is below: