Conrad’s fund had to repay $2.3 million of “false profits” that the fund had received from the Ponzi scheme, Valhalla Investment Partners, the SEC said in its complaint.
But while dozens of investors clamored for their money, Conrad paid out roughly roughly $2 million in redemptions and other payments to himself and his wife, including their annual salaries totaling $252,000, and $124,000 for down payments on aircraft, the SEC said.
His son Stuart Conrad got about $444,000 in redemptions from the fund, the SEC said. Another son, acting as a fund administrator, wrote himself a $26,500 check from one of the funds to buy a truck, the SEC said. He later repaid it without interest, but didn’t disclose the transaction to investors.
Meanwhile, a daughter-in-law got an $18,000 loan from one fund to cover credit card bills. The loan was later bought by another fund run by Conrad, and never disclosed, the SEC said.
The SEC said the elder Conrad also violated federal securities law by failing to disclose to investors that he had been barred from the investment industry in a disciplinary action in 1971.
The agency said Conrad also acted improperly by having the hedge fund pay extra fees to himself as a sub-manager of some of the investments, without disclosing the conflict of interest.
Conrad’s son, Stuart Conrad, “aided and abetted these violations,” said the SEC. The agency asked the court to impose civil penalties and to require the Conrads to repay money taken from investors.