The Securities and Exchange Commission hit Angelo Haligiannis and his Sterling Watters Group LP hedge fund with emergency enforcement action last Wednesday for lying to investors about performance, complete with false documents, prospectuses and marketing materials.

"Since 1996," the SEC release said, "Haligiannis has raised at least $27 million in the fund by grossly misrepresenting the fund’s performance to investors and potential investors."

"Phony account statements that recorded fictitious quarterly and annual investment gains and account balances" were also mentioned.

The fund’s general partners, Sterling Watters Capital Advisors, LLC and Sterling Watters Capital Management, Inc. were also named as defendants. Despite all the claims of success, the SEC said the firm was performing worse than it reported.

"In fact, the fund’s brokerage records show that the fund has lost money over the years and is now essentially worthless," the Commission said. The SEC said the hedge fund violated section 17(a) of the Securities Act of 1933, section 10(b) of the Securities Act of 1934, as well as sections of the Investment Advisers Act of 1940.

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