The Securities and Exchange Commission charged two Sarasota, Fla.-based investment advisors with fraud on Monday, saying they overstated the value of two hedge funds by as much as $160 million.

In a complaint released Monday, the SEC also said that the advisors, Neil Moody, 71, and his son Christopher, 35, told investors they actively managed the funds, when they were actually run by Arthur Nadel, which the regulator had charged with operating a large-scale Ponzi scheme last year. 

The Moodys agreed to a permanent injunction against future fraud violations. The SEC, however, is going further. It will try to recoup $42 million in management and performance fees the Moodys earned from their individual and institutional investor clients, said Chedly Dumornay, assistant regional director of the SEC’s Miami regional office.

The Moodys co-owned the hedge funds Valhalla Management and Viking Management. Between January 2003 and January 2009, the SEC alleges, they “recklessly and massively” overstated the historical investment returns and the value of the funds’ assets in account statements and offering materials provided to possible investors. The Moody’s received investment advice from Nadel. Through Scoop Management, of which Nadel was president, secretary and director, he provided investment advice and controlled the trading activities of the Moodys’ funds during that three-year period. But Nadel was actually operating a Ponzi scheme involving hundreds of investors, the SEC alleges.

In January 2009, the SEC halted Nadel’s operation and put Scoop Management, Valhalla Management and Viking Management under receivership.

“The SEC’s complaint does not allege that Chris Moody knowingly intended to harm investors,” according to an emailed statement from Moody’s attorney, Jeffrey L. Cox, of Sallah & Cox, LLP. “The complaint alleges recklessness, which Mr. Moody neither admits nor denies. Mr. Moody has cooperated from the outset with the receiver in the recovery of assets and will continue to do so.”

A copy of the SEC complain can be read here.