SEC Charges Cheetah Fund Founder Craig Allen with Defrauding Investors of Multi-Million Dollars

According to a litigation release on 24 April 2024, the Securities and Exchange Commission (SEC) charged Craig Allen with defrauding investors in The Cheetah Fund L.P., an Atlanta-based hedge fund that Allen founded and controlled.

The SEC's complaint alleges that between January 2019 and January 2023, Allen raised approximately $9.9 million from investors in the Cheetah Fund by misrepresenting the fund's supposedly superior performance. In reality, Allen caused more than $4.59 million in realized trading losses in the accounts of the Cheetah Fund and C.M. Allen, a related company also controlled by Allen.

The complaint also alleges that Allen misrepresented to investors that the Cheetah Fund used a particular accounting firm as its auditor and to prepare its Schedule K-1 tax forms, and that Allen's compensation from the Cheetah Fund for managing its portfolio was performance-based, meaning that Allen was paid only if the fund was profitable. Allen suffered large losses on the trades and therefore received little to no legitimate compensation, but he still received at least $2.64 million from Cheetah Fund and its investors.

To date, Allen has returned only about $900,000 to the Cheetah Fund investors, resulting in investor losses of about $9 million, according to the SEC.

The SEC seeks a permanent injunction, disgorgement with prejudgment interest, civil penalties, and a permanent officer-and-director bar from the United States District Court for the Northern District of Georgia. The SEC also seeks an injunction permanently barring Allen from participating in the issuance, purchase, offering, or sale of any securities, except for purchases and sales in his personal account.