$20 million investment scammer gets 63 months in prison

A South Carolina investment fund manager was sentenced today to 63 months in prison for his role in a scheme to fraudulently obtain over $20 million from investors through misrepresentations about trading strategy and fund performance, according to U.S. Attorney Rachael A. Honig.

George Heckler, 65, of Charleston, South Carolina, previously pleaded guilty by videoconference before U.S. District Judge Madeline Cox Arleo to an information charging him with one count of securities fraud. Judge Arleo imposed the sentence today in Newark federal court

Heckler, son of a former Hatfield Borough mayor, pleaded guilty Tuesday to federal criminal charges that he conducted a decade-long $20 million investment scam.

Heckler was a longtime business associate of Brenda Smith, the Rittenhouse Square-based investment manager charged in 2019 with stealing close to $60 million of investors’ money. Smith is imprisoned in North Jersey, awaiting trial, federal authorities said.

Heckler admitted his role in raising more than $20 million from investors through misrepresentations about trading strategy and fund performance.

“Mr. Heckler accepts full responsibility for his conduct” and is cooperating with federal prosecutors and the U.S. Securities and Exchange Commission, said.his lawyer Larry McMichael, who is with Philadelphia-based Dilworth Paxon.

Heckler spun a complex web to snare investors, according to the SEC and the U.S. Justice Department, which filed separate civil and criminal cases.

One of three sons of Howard Heckler, a former mayor of Hatfield Borough, George Heckler covered up losses from a prior fund by raising new money, court papers said. He then allegedly lied for years that the new funds were consistently generating positive returns.

In truth, according to the SEC complaint, most of the money had not been invested or was lost in Ponzi-scheme-like payments to prior investors to keep up appearances.

According to documents filed in this case and statements made in court, Heckler managed, controlled or was involved with multiple investment funds, including Conestoga Partner Holdings (Conestoga), Cassatt Short Term Trading Fund LP (Cassatt), CV Special Opportunity Fund LP (CVSO), and TA1 LLC (TA1).

From 2014 to 2018, Heckler misrepresented to investors that he would invest their funds in particular trading strategies.

Instead, he diverted their funds out of Cassatt and TA1 for purposes inconsistent with the trading strategies, including to pay out millions of dollars to other investors.

Heckler also used investors’ funds to cover investment losses suffered by other funds under his management and/or control.

Heckler solicited investments from Victim-1, claiming the investments would be invested in Cassatt, which employed a “first loss” trading strategy intended to protect investors from losses.

However, as of December 2013, Cassatt no longer had a brokerage account that was necessary to employ the represented trading strategy.

Despite Cassatt no longer having a brokerage account, in 2014, Heckler represented to Victim-1 that Cassatt was still engaged in a first loss trading strategy and solicited Victim-1’s investment in Cassatt.

In September 2014, Victim-1 invested approximately $9.1 million in Cassatt, relying on Heckler’s representation that Victim-1’s money would be invested consistent with Cassatt’s first loss trading strategy.

Heckler used $4.6 million of Victim-1’s investment to repay existing investors and the remainder to satisfy other obligations Heckler owed that were unrelated to Cassatt.

Heckler also approached Victim-2 about the possibility of creating a hedge fund that would deploy capital to first-loss traders, who would serve as the “first loss” protection for investors’ capital.

In late 2015, Victim-2 formed a hedge fund, utilizing the concept proposed by Heckler (Entity-1).

In 2015 and 2016, Entity-1 invested $10.1 million in TA1 via a participation agreement that provided that Entity-1’s investment would be used for an “options arbitrage dividend recapture trade,” otherwise known as the “skate trade.”

In fact, none of Entity-1’s investment was used for the “skate trade.” Entity-1’s investment was used for other purposes, including repaying others who had previously invested with Heckler.

Over the course of the scheme, Heckler sent out statements to investors that misled them into believing the value of their investments was increasing, when, in fact, the value was declining.

Heckler took approximately $1 million in fees and distributions from the fraudulently obtained investments for his personal use.

In addition to the prison term, Judge Arleo sentenced Heckler to three years of supervised release and ordered him to pay restitution of $19.25 million.

The U.S. Securities and Exchange Commission has filed a civil complaint against Heckler based on the allegations underlying the securities fraud charge.

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