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SEC obtains preliminary injunction in New York investment adviser case


The US District Court for the Eastern District of New York has issued an order granting a preliminary injunction and other relief against Brian Raymond Callahan of Old Westbury, New York, and Callahan’s investment advisory firms, Horizon Global Advisors Ltd., and Horizon Global Advisors, LLC.

The Security and Exchange Commission’s complaint, filed on 5 March, 2012, alleges that Callahan defrauded investors in five offshore funds and used some of their money to buy himself a multi-million dollar beach resort property on Long Island. According to the Complaint, Callahan raised more than USD74 million from at least two dozen investors since 2005. The Complaint alleges that Callahan promised investors that their money would be invested in liquid assets, but instead diverted investors’ money to his brother-in-law’s real estate project, which was facing foreclosure, in exchange for unsecured, illiquid, overstated promissory notes. According to the Complaint, Callahan and his advisory firms used these promissory notes to hide Callahan’s misuse of investor funds, and the overstated promissory notes inflated Callahan’s management fees.

At the SEC’s request, and after a Court hearing on 27 March, 2012, the Court issued an Order preliminarily enjoining Callahan and his advisory firms with violating the antifraud provisions of Sections 17(a)(1), (2) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a), (b) and (c) thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Among other things, the Order continues to freeze assets of Callahan and his advisory firms, requires Callahan and his advisory firms to repatriate assets that may be located outside of the United States, prohibits Callahan and his advisory firms from soliciting or accepting any new investments, and appoints Steven Weinberg of Gottesman, Wolgel, Malamy, Flynn and Weinberg, P.C. as receiver for the estates of Callahan’s advisory firms.

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