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EIA All Weather Alpha Fund and Owner Middlebrooks Charged with Fraud

EIA All Weather Alpha Fund

Detroit-based EIA All Weather Alpha Fund I Partners LLC (EIA) and Andrew M. Middlebrooks, its sole owner, have been charged with fraud by the Securities Exchange Commission (SEC). It appears from the charges that the fund indulged in the misuse and misappropriation of investor money over many years.

The U.S. District Court in the Eastern District of Michigan, where the SEC complaint was filed, granted emergency relief to the SEC on the 19th of May, 2022, for stopping the fraudulent operations. The relief includes freezing the assets of the defendants as well as the named relief defendants, apart from a temporary restraining order against Middlebrooks and EIA.

Haselkorn & Thibaut has opened an investigation into EIA All Weather Alpha Fund I Partners. Investors are encouraged to call for a fast, free, and private consultation by calling 1-800-856-3352. 

EIA All Weather Alpha Fund I LP, EIA All Weather Fund Partners II LLC, and Shop Style Shark LLC are listed as relief defendants. Andrew M. Middlebrooks, the owner of the EIA All Weather Alpha Fund I Partners LLC, is accused of defrauding investors out of $39 million. Middlebrooks allegedly misappropriated investor funds, misrepresented the fund’s audit opinion, and misused new investor money to make Ponzi-like payments to earlier investors. Those who invested in the fund are now facing criminal charges.

The SEC is seeking injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against Middlebrooks and EIA. The action is also named EIA All Weather Alpha Fund I, LP, EIA All Weather Alpha Fund Partners II, LLC, and Shop Style Shark, LLC. Middlebrooks has not responded to the allegations against him.

The defendants made false representations about the fund’s performance and financials to attract investors. They falsely represented the fund’s performance as extremely successful, and it generated a cumulative return of over 2,500 percent. However, the SEC claims that investors were actually exposed to catastrophic trading losses of around $27 million. Middlebrooks is now facing criminal charges of fraud and will likely face prison time.

The charges

Middlebrooks and EIA have been charged with violation of the antifraud provisions of federal securities laws. In addition, Middlebrooks has been charged with the abetment and aid of EIA’s violations of the Investment Advisers Act 1940.

It has been alleged in the complaint that between the middle of 2017 through April 2022, investors in their hedge fund, EIA All Weather Alpha Fund I LP, had been deceived by EIA as well as Middlebrooks. The deception included making repeated incorrect statements about the performance of the fund as well as its assets, issuing account statements to investors that were falsified, misrepresenting that there was an auditor on board the fund, as well as manufacturing false audit opinions, and circulating them to investors.

The SEC also alleged that in classic Ponzi fashion, the fund used new investor money to make payments to older investors to create a charade of returns being generated by the fund. Middlebrooks is also alleged to have used the fund’s money for personal expenses.

  1. Dabney O’Riordan, co-chief of the SEC’s Asset Management Unit, Division of Enforcement, commented “As we allege in the complaint, Middlebrooks lured investors by touting extraordinary performance returns and then concealed the truth of his fraud, including by fabricating documents provided to investors.”

What does the SEC seek?

It seeks disgorgement of ill-gotten gains with prejudgment interest, injunctions, and financial penalties against EIA and Middlebrooks. Federal securities regulators have accused a hedge fund of committing fraud. Last week, the Securities and Exchange Commission filed a complaint against EIA All Weather Alpha Fund I Partners LLC, a New York-based hedge fund. On Tuesday, the complaint was unsealed, exposing Middlebrooks’ multiple-year scheme. The SEC claims Middlebrooks used his position as the sole owner to misappropriate investors’ money.

Andrew Middlebrooks

The SEC has filed a lawsuit against Andrew Middlebrooks, the owner of a Detroit-area hedge fund, for $39 million in fraud. Middlebrooks allegedly operated a Ponzi scheme, misusing investors’ money to pay other investors. He also misled investors into believing that the fund was profitable while using their money for his own personal use. Among his personal expenses, he bought jewelry and used the investors’ money to pay credit card bills.

The SEC complaint was filed in the Eastern District of Michigan, charging EIA with violating federal securities laws, and Middlebrooks with assisting in their violations of the Investment Advisers Act of 1940. The SEC has sought injunctions, disgorgement of ill-gotten gains, and financial penalties against EIA and Middlebrooks. The lawsuit names EIA All Weather Alpha Fund I, LP, EIA All Weather Alpha Fund II, LLC, and Shop Style Shark, LLC as relief defendants.

Performance of EIA All Weather Alpha Fund I Partners

The EIA All Weather Alpha Fund I Partners has been performing well since the fund, but the current allegation of fraud makes the posted returns useless. Andrew Middlebrooks founded the hedge fund in Detroit, which became the first minority-owned quantitative hedge fund in the state. Middlebrooks developed a proprietary research system known as GLM Analytics that analyzes over 3000 listed stocks and exchange-traded funds. The fund’s managers have a good track record, with its fund performance over the last two years being the most impressive.

Middlebrooks’ scheme allegedly involved deceiving investors of the EIA All Weather Alpha Fund I, LP. The allegations allege that Middlebrooks misappropriated $39 million from investors by falsifying investor account statements. He also falsely claimed the fund had an auditor, which spread a phony audit opinion among investors. Middlebrooks used new investor funds in a Ponzi-like manner, misappropriating them for his personal use.

In the lawsuit, the SEC alleges that Middlebrooks defrauded investors of millions of dollars. The SEC alleges that Middlebrooks committed deceptive conduct by making Ponzi-like payments to investors to cover up his fund’s poor performance. Middlebrooks used investor funds to transfer $470,000 to his wife’s business and $750,000 to his personal bank account. In addition, Middlebrooks spent nearly $64,000 of investor funds on his jewelry, thereby causing the fund to lose almost all of its investors’ funds.

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