SEC Announces First Deferred Prosecution Agreement With Individual
Scott Herckis, former administrator of Heppelwhite Fund LP, aided and abetted fund manager Berton Hochfeld’s $1.5M fraud but avoided prosecution under the SEC’s first-ever individual deferred prosecution agreement after voluntarily reporting the scheme, providing critical cooperation, and disgorging $50,000 in fees, leading to a $6M investor payout and a five-year industry ban.
Scott Herckis, former administrator of Heppelwhite Fund LP, aided and abetted fund manager Berton Hochfeld’s securities fraud, which involved misappropriating over $1.5 million from investors and inflating performance figures. In exchange for his voluntary, substantial cooperation—including reporting the fraud, producing voluminous documents, and enabling the SEC’s emergency November 2012 action—Herckis entered into the SEC’s first deferred prosecution agreement with an individual, requiring him to disgorge $50,000 in fees and prohibiting him from working in the hedge fund industry for five years. A federal court has approved a $6 million distribution to harmed investors, with additional funds expected from the sale of Hochfeld’s personal assets, including antiques purchased with stolen money.
Scott Herckis, who served as administrator of Connecticut-based Heppelwhite Fund LP from December 2010 to September 2012, aided and abetted fund manager Berton M. Hochfeld’s securities fraud, which involved misappropriating over $1.5 million from investors and falsely inflating the fund’s performance. After resigning, Herckis voluntarily contacted government authorities, produced extensive documentation, and provided detailed accounts of Hochfeld’s fraudulent activities, enabling the SEC to file an emergency enforcement action within weeks in November 2012 that halted the fraud and froze both the fund’s and Hochfeld’s personal assets. In return for his cooperation, the SEC entered into its first-ever deferred prosecution agreement (DPA) with an individual, holding Herckis accountable by requiring him to disgorge approximately $50,000 in fees and imposing a five-year ban from working in the hedge fund industry or associating with brokers, advisers, or registered investment companies. A federal judge approved a $6 million distribution to defrauded investors from seized assets, with a second round expected after the sale of Hochfeld’s personal property—including antiques bought with stolen funds. The SEC credited Herckis’ proactive cooperation as critical to uncovering and stopping the fraud, emphasizing that even non-innocent actors can earn significant credit for assisting investigations. The investigation was led by SEC staff with support from the U.S. Attorney’s Office for the Southern District of New York and the FBI.
Exhibits & Attached Documents (1)
Extracted insights
- $6.00M $6 million $1M–$10M
- $1.50M $1.5 million $1M–$10M
- $50K $50,000 $10K–$100K
- person berton m. hochfeld
- person scott herckis
- agency Securities and Exchange Commission
- SEC announced deferred prosecution agreement with Scott Herckis
- Scott Herckis served as administrator for Heppelwhite Fund LP
- Heppelwhite Fund LP was founded and managed by Berton M. Hochfeld
- Berton M. Hochfeld misappropriated more than $1.5 million from Heppelwhite Fund LP
- SEC filed enforcement action against Berton M. Hochfeld in November 2012
- Federal court judge approved $6 million distribution to Heppelwhite investors
- Scott Herckis served as fund administrator from December 2010 to September 2012
- Scott Herckis resigned and contacted government authorities in September 2012
- Berton M. Hochfeld overstated hedge fund performance to investors
- Scott Herckis must disgorge approximately $50,000 in fees
- Scott Herckis cannot serve as fund administrator for five years
- Scott Herckis aided and abetted Berton M. Hochfeld's securities law violations
- SEC froze Hochfeld's personal assets and hedge fund assets
The Securities and Exchange Commission today announced a deferred prosecution agreement with a former hedge fund administrator who helped the agency take action against a hedge fund manager who stole investor assets. Deferred prosecution agreements (DPAs) encourage individuals and companies to provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. According to the SEC’s DPA with Scott Herckis – the agency’s first with an individual – he served as administrator for Connecticut-based Heppelwhite Fund LP, which was founded and managed by Berton M. Hochfeld. With voluntary and significant cooperation from Herckis, the SEC filed an emergency enforcement action against Hochfeld in November 2012 for misappropriating more than $1.5 million from the hedge fund and overstating its performance to investors. The SEC’s action halted the fraud and froze the hedge fund’s assets and Hochfeld’s personal assets, which are now being used to compensate defrauded investors. Last month, a federal court judge approved a $6 million distribution to harmed Heppelwhite investors. “We’re committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “To balance these competing considerations, the DPA holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency.” According to the DPA, Herckis served as the fund’s administrator from December 2010 to September 2012, when he resigned and contacted government authorities with his concerns about Hochfeld’s conduct and certain discrepancies in Heppelwhite’s accounting records. Herckis voluntarily produced voluminous documents and described to the SEC how Hochfeld was able to perpetrate his fraud. As a result, the SEC was able to file the emergency action within weeks. Under the terms of the DPA, which states that Herckis aided and abetted Hochfeld’s securities law violations, Herckis must comply with certain prohibitions and undertakings. Herckis cannot serve as a fund administrator or otherwise provide any services to any hedge fund for a period of five years, and he also cannot associate with any broker, dealer, investment adviser, or registered investment company. The DPA requires Herckis to disgorge approximately $50,000 in fees he received for serving as the fund administrator, which will be added to the Fair Fund that has been created to help compensate Heppelwhite investors. A second round of distributions from the Fair Fund is expected after additional money is collected for harmed investors through the sale of Hochfeld’s personal assets, including a collection of antiques he paid for with stolen funds. The SEC’s investigation was conducted by Brian Vann, Stacy Fresch, and Brian O. Quinn. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.
The Securities and Exchange Commission today announced a deferred prosecution agreement with a former hedge fund administrator who helped the agency take action against a hedge fund manager who stole investor assets. Deferred prosecution agreements (DPAs) encourage individuals and companies to provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. According to the SEC’s DPA with Scott Herckis – the agency’s first with an individual – he served as administrator for Connecticut-based Heppelwhite Fund LP, which was founded and managed by Berton M. Hochfeld. With voluntary and significant cooperation from Herckis, the SEC filed an emergency enforcement action against Hochfeld in November 2012 for misappropriating more than $1.5 million from the hedge fund and overstating its performance to investors. The SEC’s action halted the fraud and froze the hedge fund’s assets and Hochfeld’s personal assets, which are now being used to compensate defrauded investors. Last month, a federal court judge approved a $6 million distribution to harmed Heppelwhite investors. “We’re committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders,” said Scott W. Friestad, an associate director in the SEC’s Division of Enforcement. “To balance these competing considerations, the DPA holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency.” According to the DPA, Herckis served as the fund’s administrator from December 2010 to September 2012, when he resigned and contacted government authorities with his concerns about Hochfeld’s conduct and certain discrepancies in Heppelwhite’s accounting records. Herckis voluntarily produced voluminous documents and described to the SEC how Hochfeld was able to perpetrate his fraud. As a result, the SEC was able to file the emergency action within weeks. Under the terms of the DPA, which states that Herckis aided and abetted Hochfeld’s securities law violations, Herckis must comply with certain prohibitions and undertakings. Herckis cannot serve as a fund administrator or otherwise provide any services to any hedge fund for a period of five years, and he also cannot associate with any broker, dealer, investment adviser, or registered investment company. The DPA requires Herckis to disgorge approximately $50,000 in fees he received for serving as the fund administrator, which will be added to the Fair Fund that has been created to help compensate Heppelwhite investors. A second round of distributions from the Fair Fund is expected after additional money is collected for harmed investors through the sale of Hochfeld’s personal assets, including a collection of antiques he paid for with stolen funds. The SEC’s investigation was conducted by Brian Vann, Stacy Fresch, and Brian O. Quinn. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.