Fraud results in 25-year trading ban

VANCOUVER (CP) -- A B.C. man and his company Chivas Hedge Fund Ltd. are banned from trading in securities for 25 years after he admitted to committing fraud that cost investors hundreds of thousands of dollars.

 

The British Columbia Securities Commission also said Friday that Michael Ernst Ruge will pay $150,000 and cannot act as an officer or director of any issuer for 25 years, except in "limited circumstances."

 

Ruge was the sole shareholder, director and officer of Chivas Hedge Fund Ltd., which must cease trading over the same 25-year period.

 

Ruge admitted to the commission that he falsely stated that Chivas LP was a hedge fund and claimed he had "cream of the crop people" in a New York office when, in fact, there were no New York employees.

 

He also stated Chivas had sold all of its units, reaching its $20-million cap, when it had only sold about $1.5 million worth units; and, falsely claimed Chivas LP had a rate of return between 26- to 45-per cent.

 

In a settlement with the BCSC, Ruge admitted he placed more than $780,000 of investors' money with himself, or companies and individuals affiliated with him.

 

"Almost none of the money raised by Ruge was used as contemplated by the offering memorandum" that Ruge had used to collect funds from investors in Alberta, B.C. and Ontario between Dec. 18, 2001 and Feb. 6, 2003.

 

About $240,000 was refunded to investors, "but there is little prospect of additional recovery and the investors have lost most of their money," the commission said.

 

Ruge told investors that Chivas LP was a hedge fund when only a small portion of the investors' money was placed in actively traded stocks, the commission said.

 

His memorandum also overstated his business experience and qualifications and falsely stated that Chivas LP was a limited partnership in B.C.