SEC Charges ICP Asset Management and Its Founder in CDO Fraud Case

The Securities and Exchange Commission [SEC] on Monday accused New York-based financial services firm ICP Asset Management and its founder Thomas Priore of defrauding investors in a series of complex collateralized debt obligations (CDOs) for their own benefit.

The SEC alleges that ICP and Priore “fraudulently managed” four multibillion-dollar “Triaxx” CDOs, which invested primarily in MBS.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, “ICP and Priore directed more than a billion dollars of trades for the Triaxx CDOs at what they knew were inflated prices. ICP and Priore repeatedly caused the Triaxx CDOs to overpay for securities in order to make money for ICP and protect other ICP clients from realizing losses. The prices for such trades often exceeded market prices by substantial margins. In some trades, ICP caused the CDOs to pay a price that was substantially higher than the price another ICP client paid for the security earlier the same day.”

The SEC also said that “ICP and Priore caused the CDOs to make numerous prohibited investments without obtaining necessary approvals, and they later misrepresented those investments to the trustee of the CDOs and to investors. The prices of many of these investments were intentionally inflated to allow ICP to collect millions of dollars in advisory fees from the CDOs. The SEC further alleges that ICP and Priore executed undisclosed cash transfers from a hedge fund they managed in order to allow another ICP client to meet the margin calls of one of its creditors. Priore subsequently misrepresented the transfers to the hedge fund’s investors.”

Robert Khuzami, Director of the SEC’s Enforcement Division, said “ICP and Priore repeatedly put themselves ahead of their clients. Instead of acting as fiduciaries, they took advantage of a distressed market to line their own pockets.”

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