Missouri Commissioner of Securities Matt Kitzi has issued two enforcement orders against Stephen M. Coleman, owner of the now-defunct Chicken Little Fund Group, for selling shares of the fund to investors served by his advisory firm, Daedalus Capital, without disclosing the conflicts of interest.
The first order accuses Coleman of fraud and the second seeks to revoke his investment advisor license as well as those of the two companies.
In addition, the regulator said that Coleman used hundreds of thousands of dollars in fees and commissions meant for the operation of the two companies for personal expenses, and even dipped into the investments in the Chicken Little Fund Group to pay for his own salary, a financial plan for him and his wife and a $100,000 personal tax lien. Opened in 2005, the $1.2 million fund lasted for two years, but shut down in January when it couldn’t pay its expenses.
The order also says that Coleman failed to inform investors that there were two prior lawsuits against him for breach of contract.
“Many investors hear big stories about the big money to be made in hedge funds or private equity funds, and they want to be a part of that action,” said Missouri Secretary of State Robin Carnahan. “But investors must be careful, and should always check out the merits, costs and fees associated with an investment, as well as the background of the people who are offering it.”
Ironically, Daedalus Capital’s website lists “12 Cardinal Principles,” with the second being, “Let integrity define our labor and all interactions.”
Missouri Securities Division is seeking $200,000 in civil penalties and costs. Coleman has 30 days to request a hearing on the fraud charges and penalties.