SEC v. DIGITAL REALTY TRUST, No. 1:17-CV-10928-IT, District of Massachusetts (June 24, 2019) — Complaint

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UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

___________________________________________
)

SECURITIES AND EXCHANGE COMMISSION, )
)

Plaintiff,   )
)

v.      ) Case No.
)

YASUNA MURAKAMI; AVI CHIAT;   ) JURY TRIAL DEMANDED
MC2 CAPITAL MANAGEMENT, LLC; MC2  )
CANADA CAPITAL MANAGEMENT, LLC; )
       )
   Defendants,   )
       )
 And      )
       )
MC2 CAPITAL PARTNERS, LLC; MC2 CAPITAL  )
VALUE PARTNERS, LLC; MC2 CAPITAL  )
CANADIAN OPPORTUNITIES FUND, LLC, )
       )
   Relief Defendants  )
___________________________________________ )

COMPLAINT

 Plaintiff Securities and Exchange Commission (the “Commission”) alleges the following

against the defendants, Yasuna Murakami (“Murakami”); Avi Chiat (“Chiat”); MC2 Capital

Management, LLC (“MC2 Capital”); and MC2 Canada Capital Management, LLC (“MC2

Canada”); and the relief defendants, MC2 Capital Partners, LLC (the “Partners Fund”); MC2

Capital Value Partners, LLC (the “Value Fund”); and MC2 Capital Canadian Opportunities

Fund, LLC (the “Canadian Fund”), and hereby demands a jury trial:

PRELIMINARY STATEMENT

1. From 2007 to 2016, Yasuna Murakami and Avi Chiat defrauded more than 50

investors in three hedge funds run by their two-person investment advisory businesses, MC2

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Capital and MC2 Canada, and violated their fiduciary duties as advisers to those funds, by lying

to investors about the funds’ performance in falsified account statements, falsified tax

documents, falsified performance letters, and other misleading communications.

2. Murakami and Chiat raised more than $15 million from investors, and misled

investors into believing they had invested it profitably.  In reality, through unprofitable trading

Murakami and Chiat lost more than 70% of the money raised for their first hedge fund in less

than two years, and over nearly a decade Murakami stole more than $8 million of investor funds

and spent those funds on personal and business expenses.  Murakami used an additional $1.3

million of investor funds to make Ponzi-like payments to earlier investors as purported

investment gains, using money he misappropriated from later investors.  Chiat misled investors

and prospective investors not only by lying about the performance of the funds, but also by

omitting to inform them of many important facts suggesting there was a high risk that Murakami

was stealing investor money.

3. By virtue of the defendants’ fraudulent conduct, which is detailed further herein,

the defendants engaged in:

a. fraud or deceptive conduct in connection with the purchase or sale of

securities, in violation Section 10(b) of the Exchange Act of 1934 (“Exchange

Act”) and Rule 10b-5 thereunder;

b. fraud in the offer or sale of securities, in violation of Section 17(a) of the

Securities Act of 1933 (“Securities Act”);

c. fraud or deceptive conduct upon advisory clients in violation of Sections

206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”);

and

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d. fraud or deceptive conduct by an investment adviser to a pooled investment

vehicle, in violation of Section 206(4) of the Advisers Act and Rule 206(4)-8

thereunder.

4. Murakami and Chiat also aided and abetted MC2 Capital’s and MC2 Canada’s

violations of Sections 206(1), (2) & (4) of the Advisers Act and Rule 206(4)-8 promulgated

thereunder.

5. The Commission seeks a permanent injunction and disgorgement pursuant to

Section 21(d)(1) of the Exchange Act, 15 U.S.C. § 78u(d)(1), Section 20(b) of the Securities Act,

15 U.S.C. § 77t(b), and Section 209(d) of the Advisers Act, 15 U.S.C. § 80b-9(d).  The

Commission seeks the imposition of civil penalties pursuant to Section 21(d) of the Exchange

Act, 15 U.S.C. § 78u(d), Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section

209(e) of the Advisers Act, 15 U.S.C. § 80b-9(e).

JURISDICTION

6. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and

27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), & 78aa, Sections 20(d) and 22(a) of the

Securities Act, 15 U.S.C. §§ 77t(d), 77v(a), and Sections 209(d), 209(e), and 214 of the Advisers

Act, 15 U.S.C. §§ 80b-9(d), 80b-9(e), 80b-14.

7. Venue is proper in this District because the individual defendants reside in

Massachusetts, all defendants transacted business in Massachusetts, and many investors are

located here.

8. In connection with the conduct described in this Complaint, the defendants

directly or indirectly made use of the mails or the means or instruments of transportation or

communication in interstate commerce.

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9. The defendants’ conduct has involved fraud, deceit, or deliberate or reckless

disregard of regulatory requirements, and has resulted in substantial loss, or significant risk of

substantial loss, to other persons.

DEFENDANTS

10. Yasuna Murakami is a resident of Cambridge, Massachusetts.  Since 2007,

Murakami has been a partner and portfolio manager at MC2 Capital.  Since 2011, Murakami has

been a partner and portfolio manager at MC2 Canada.  Since 2007, Murakami has solicited

investments in three hedge funds he created and managed through MC2 Capital and MC2

Canada.  On December 19, 2016, Murakami appeared before officers of the Commission to

provide sworn testimony and asserted his Fifth Amendment privilege against self-incrimination

in response to all questions regarding MC2 Capital, MC2 Canada, and the three hedge funds he

operated.

11. Avi Chiat is a resident of Wellesley, Massachusetts.  Between August 2007 and

2015, Chiat was a partner and portfolio manager at MC2 Capital.  Between 2011 and 2015, Chiat

was a partner and portfolio manager at MC2 Canada.  In 2007, Chiat was registered with the

Financial Industry Regulatory Authority, Inc., and the Commonwealth of Massachusetts as a

registered representative of a brokerage firm.  Those registrations were terminated on July 18,

2007.  From May 2015 to April 2017, Chiat was registered with the Commonwealth of

Massachusetts as an investment adviser representative at a Cambridge, Massachusetts investment

advisory firm.  Chiat is an attorney who was admitted to the Massachusetts bar on June 20, 2016,

and is currently an inactive member.

12. MC2 Capital Management, LLC (“MC2 Capital”) is a limited liability

company organized on August 17, 2007, in the Commonwealth of Massachusetts, with a

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principal place of business in Cambridge, Massachusetts.  Murakami and Chiat were the sole

managers of MC2 Capital.  MC2 Capital was the Managing Member of and investment adviser

to two hedge funds, the Partners Fund and the Value Fund, and was responsible for the funds’

investments and day-to-day activities.  MC2 Capital has never registered with the Commission.

13. MC2 Canada Capital Management, LLC (“MC2 Canada”) is a limited

liability company organized on May 18, 2011, in the Commonwealth of Massachusetts, with a

principal place of business in Cambridge, Massachusetts.  MC2 Canada was the Managing

Member of and investment adviser for the Canadian Fund.  Murakami, Chiat, and Donville Kent

Asset Management Inc. (“Donville Kent”) were members of MC2 Canada, which entitled each

to share in the management and performance fees from managing the Canadian Fund.  From

2011 to May 2015, Donville Kent managed the Canadian Fund’s investments.  MC2 Canada has

never registered with the Commission.

RELIEF DEFENDANTS

14. MC2 Capital Partners, LLC (the “Partners Fund”), is a limited liability

company organized on August 17, 2007, in the State of Delaware, with a principal place of

business in Cambridge, Massachusetts.  The Partners Fund is a pooled investment vehicle which

was managed by Murakami and Chiat through MC2 Capital.  The Partners Fund has never

registered with the Commission.

15. MC2 Capital Value Partners, LLC (the “Value Fund”), is a limited liability

company organized on August 28, 2008, in the State of Delaware, with a principal place of

business in Cambridge, Massachusetts.  The Value Fund is a pooled investment vehicle which

was managed by Murakami and Chiat through MC2 Capital.  The Value Fund has never

registered with the Commission.

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16. MC2 Capital Canadian Opportunities Fund, LLC (the “Canadian Fund”), is

a limited liability company organized on May 18, 2011, in the State of Delaware, with a

principal place of business in Cambridge, Massachusetts.  The Canadian Fund is a pooled

investment vehicle managed by Murakami, Chiat (until early 2015), and Donville Kent (until

May 2015) through MC2 Canada.  The Canadian Fund has never registered with the

Commission.

STATEMENT OF FACTS

I. Fund and Investment History

A. MC2 Capital and The Partners Fund

17. In August 2007, Yasuna Murakami and his business partner Avi Chiat launched a

hedge fund advisory firm, MC2 Capital, and their first hedge fund, the Partners Fund.

18. The Partners Fund was set up as a limited liability company, or LLC, a corporate

structure through which the “members” of the LLC are entitled to share in the profits of the

company.  To become an investor in the Partners Fund, an individual purchased an interest in the

fund and became a “non-managing member” of the fund.  This was done by signing a

Subscription Agreement and providing the amount of their investment to the Managing Member,

MC2 Capital.  The Subscription Agreement provided that the terms of the investment were

further specified in the fund’s Private Placement Memorandum (“PPM”), a document which is

typically provided to prospective investors and describes the terms of a private offering for sale

of a security.

19. The Partners Fund had a PPM which Murakami and Chiat provided to investors.

It described the fund’s investment strategy as “based upon the value investing style of the

‘Graham & Dodd’ school,” according to which “the Fund will seek to make investments in

companies and sectors whose shares appear to be under-priced. . . .”

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20. MC2 Capital was the Managing Member of the Partners Fund, and Murakami and

Chiat were the sole Managers of MC2 Capital.  MC2 Capital, Murakami, and Chiat acted as

investment advisers to the Partners Fund, and were responsible for day-to-day management of its

investments.  As such, they assumed a fiduciary duty to serve in the best interest of the Partners

Fund.  Investors in the fund expected to earn profits on their investments, and the success thereof

depended solely on the efforts of MC2 Capital, Murakami, and Chiat.

21. According the Partners Fund’s PPM, MC2 Capital was entitled to be compensated

for investment adviser services it provided to the Partners Fund by (1) a monthly management

fee, equal to one-twelfth of 2% of the fund’s Net Asset Value1 (“NAV”), and (2) a performance

fee of 20% of any increase in the NAV for each quarter, subject to a “high water” provision.2

The PPM further represented that MC2 Capital would be permitted a $50,000 advance,

purportedly to pay for setup costs, which was to be credited against future management fees.

22. Murakami and Chiat raised $2,043,580 in Partners Fund investments in 2007,

primarily from relatives of Chiat, but also including $200,000 invested by Murakami and

$100,000 by Chiat.

23. Murakami and Chiat used this money to trade in securities on behalf of the

Partners Fund using a brokerage account in the name of the Partners Fund.  Partners Fund

investors sent their money to the fund’s brokerage account by wire or check, where it could then

be utilized for trading.  Murakami and Chiat directed the Partners Fund’s trading.

1 A fund’s “Net Asset Value” is the value of its assets minus its liabilities.

2 A “high water” provision prevents the payment of a performance fee when more recent
investment returns do not make up for previous investment losses, i.e., the fund remains below
its “high water” mark.

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24. In November 2007, Murakami’s and Chiat’s trading resulted in substantial losses

for the Partners Fund.  By the end of 2007, the fund had only $1,388,610 in total assets, having

lost nearly one-third of its value.

25. In 2008, Murakami and Chiat raised an additional $1,637,000 in investments in

the Partners Fund.

26. In March 2008, Murakami began systematically misappropriating investor money

from the Partners Fund.  Murakami directed wires of money from the brokerage account to bank

accounts he controlled in the names of MC2 Capital Management LLC and MC2 Capital

Partners, LLC.  Murakami then used these funds for personal and business expenses, including

meals, travel, and paying his personal credit card bills.

27. Murakami’s and Chiat’s trading continued to result in substantial losses for the

Partners Fund in 2008.  September and October 2008 were particularly devastating, as the fund

lost more than $1.6 million.  By the end of 2008, more than 80% the $3.68 million that the

Partners Fund had received from investors was gone.  Approximately $2.7 million had been lost

in unprofitable trading, while $373,130 had been withdrawn by Murakami, leaving the Partners

Fund with $598,532 in assets.

28. In 2009 and 2010, Murakami continued to misappropriate investor money from

the Partners Fund.  At the end of 2010, the fund was left with only $45,372 in assets.  In

September 2011, Murakami transferred the Partners Fund brokerage account to a different

broker, and then drained the account to only a few thousand dollars by the end of November

2011.  In total, Murakami withdrew more than $1 million from the Partners Fund, grossly in

excess of any fees to which MC2 Capital was entitled.  At the end of October 2016, the Partners

Fund had less than $3,000 in assets.

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B. The Value Fund

29. In August 2008, Murakami and Chiat created a new fund, the Value Fund.  Like

the Partners Fund, the Value Fund’s PPM described a purported value-investing strategy and a

compensation structure through which MC2 Capital would be entitled to a monthly management

fee (one-twelfth of 2% of the NAV) and a performance fee (20% of the quarterly increase in the

NAV, subject to a high water provision).

30. The Value Fund was a pooled investment vehicle, and MC2 Capital was its

Managing Member.  MC2 Capital, Murakami, and Chiat acted as investment advisers to the

Value Fund, and were responsible for day-to-day management of its portfolio.  As such, they

assumed a fiduciary duty to serve in the best interest of the Value Fund.  Investors in the fund

expected to earn profits on their investments, and the success thereof depended solely on the

efforts of MC2 Capital, Murakami, and Chiat.

31. Murakami and Chiat struggled initially to raise investments in the Value Fund,

receiving $250,000 from one investor in November 2008 and nothing in 2009.  From 2010 to

2013, Murakami and Chiat raised an additional $585,000 from four new investors.  In total, they

raised $835,000 in the Value Fund.

32. Starting in June 2010, Murakami misappropriated substantially all of the Value

Fund’s assets.  Only $700,000 was actually deposited into the Value Fund’s brokerage account

and traded.  The remaining $135,000 was deposited instead into a bank controlled by Murakami,

and used for personal and business expenses.

33. Out of the $700,000 that was transferred to the brokerage account and traded,

Murakami withdrew $643,438, which he spent on personal and business expenditures, including

to cover up his thefts from other funds.

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C. The Canadian Fund

34. In 2011, Murakami and Chiat launched another advisory firm, MC2 Canada, and

a third hedge fund, the Canadian Fund.  Like the earlier funds, the Canadian Fund was set up as a

limited liability company in which investors could purchase a membership interest by executing

a Subscription Agreement which incorporated the Canadian Fund’s PPM.  According to the

PPM, MC2 Canada was entitled to a monthly management fee (one-twelfth of 2% of the NAV)

and a performance fee (20% of the quarterly increase in the NAV, subject to a high water

provision).

35. The Canadian Fund was a pooled investment vehicle, and MC2 Canada was its

Managing Member.  MC2 Canada, Murakami, and Chiat acted as investment advisers to the

Canadian Fund and were responsible for its day-to-day management.  Accordingly, they assumed

a fiduciary duty to serve in the best interest of the Canadian Fund.  Investors in the fund expected

to earn profits on their investments, and the success thereof depended solely on the efforts of

MC2 Canada, Murakami, and Chiat.

36. Murakami, Chiat, and MC2 Canada entered into an arrangement with Donville

Kent, a Canadian asset management firm, whereby Donville Kent managed the Canadian Fund’s

investments.  The Canadian Fund’s PPM described its objective as “to mimic the investment

strategy and investments of the Donville Kent Asset Management Inc. Capital Ideas Fund,”

which it further described as having the objective to “exceed the annual returns of the S&P 500

or another index whose return mirrors the S&P,” using a value-investing strategy.

37. In marketing materials, Murakami and Chiat described the Canadian Fund as

being “managed by one of the top performing portfolio managers in Canada,” touted the track

record of the Capital Ideas Fund, and represented that Donville Kent would be “responsible for

the day-to-day operation of the Funds [sic] pursuant to management agreements.”

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38. Murakami and Chiat raised approximately $10.93 million for the Canadian Fund

from investors from 2011 to 2016.

39. From the Canadian Fund’s inception in 2011 until May 2015, a vice president at

Donville Kent directed the trading for the Canadian Fund, using the fund’s brokerage account.

In exchange for its advisory services, Donville Kent was given a membership interest in MC2

Canada, which entitled Donville Kent to 70% of the management and performance fees earned

by MC2 Canada.

40. On February 27, 2015, Donville Kent gave notice of its termination of its

relationship with MC2 Canada and the Canadian Fund.  Within days, Chiat declared that he

would no longer be involved in the Canadian Fund or any MC2 entity, and arranged for family

members and several friends to withdraw their investments in the Canadian Fund.  Following a

90-day notice period, Donville Kent stopped directing the trading in the Canadian Fund.

41. From 2011 to 2016, Murakami misappropriated at least $6 million from Canadian

Fund investors and spent the money on personal and business expenses.  He also withdrew

approximately $1.3 million from the Canadian Fund and used it to make Ponzi-like payments of

purported returns to earlier investors.  By the end of November 2016, the Canadian Fund

brokerage account was empty.

II. The Defendants Intentionally Misled Investors Regarding the Performance of Their
Funds

42. Through MC2 Capital and MC2 Canada, Murakami and Chiat misled investors in

the Partners Fund, the Value Fund, and the Canadian Fund.  The defendants made these

misstatements in writing, in falsified tax documents, inflated individual account statements, and

wholly fictitious reports that falsely represented the funds’ results.  Murakami and Chiat also

made these misstatements to investors and prospective investors orally, in person or by phone.

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Although Murakami and Chiat held themselves out to investors as investment advisers to the

funds, they omitted to state the material facts necessary to make their other statements about the

funds not misleading.

43. Murakami and Chiat began making misleading statements to their investors after

the Partners Fund suffered substantial trading losses in 2007, and continued to do so during the

duration of their work for MC2 Capital.  Murakami and Chiat made similar misstatements to

investors in the Value Fund, starting in 2008.  With respect to both funds, Murakami and Chiat

misled investors by reporting false account balances that far exceeded the actual assets of the

funds.

44. Murakami’s and Chiat’s false statements about performance and capital account

balances to investors in the Canadian Fund concealed Murakami’s misappropriation of investor

funds, overstated the fund’s performance, and overstated investors’ individual capital account

balances.

45. At all relevant times, Murakami and Chiat actually knew, or were reckless in not

knowing, that their statements to investors about the performance of the funds and that their

capital account balances therein were false.

A. The Defendants Provided Investors With Falsified Schedule K-1s

46. MC2 Capital provided investors in the Partners Fund and the Value Fund with

Schedule K-1s, a tax form issued annually to investors in a partnership, which reflected account

balances for individual investors which Murakami and Chiat knew to be false.

47. MC2 Capital first issued falsified Schedule K-1s to investors in early 2008,

regarding balances in the Partners Fund at the end of 2007.  As both Murakami and Chiat knew,

the Partners Fund was audited after the end of 2007 by an independent audit firm, which

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produced audited financial statements for the Partners Fund, and those audited financial

statements were provided to Murakami and Chiat.  The audited financial statements for the

Partners Fund for 2007 reflected substantial trading losses.  In addition to its audit, the

independent audit firm was tasked with preparing Schedule K-1s for investors in the Partners

Fund.  To prevent investors from seeing the Partners Fund’s trading losses or losses to their

account balances, Murakami arranged for the auditor to send investors’ Schedule K-1s directly to

MC2 Capital, not to investors, and then one or both of Murakami and Chiat fabricated new

Schedule K-1s which showed phony trading results and account balances and provided those

fabricated Schedule K-1s to investors.  For example, MC2 Capital provided one pair of husband

and wife investors with a Schedule K-1 for the Partners Fund which claimed only a small loss.

In reality, their capital account balance had declined by $505,475, nearly one-third of their

investment, according to the auditor.

48. In successive years, MC2 Capital provided Partners Fund investors with falsified

Schedule K-1s which portrayed increasing capital account balances for individual investors.  In

reality, the Partners Fund had not only failed to earn profits, it had been reduced to only de

minimis assets due to the undisclosed trading losses and Murakami’s thefts.  For example, MC2

Capital provided the husband and wife investors referred to in paragraph 47 with a Schedule K-1

for 2011 that falsely reflected a gain of more than $700,000 over their initial investment, and a

total capital account balance at year-end of $3,713,375.  In reality, at the end of 2011, the entire

Partners Fund had total assets of only $3,548.  This same couple continued to receive fabricated

Schedule K-1s for the Partners Fund each tax year, continuing through 2015.  The Schedule K-1s

showed a continuous string of phony profits, ultimately reflecting an ending capital balance of

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$6,238,835.  In reality, by the end of 2015, the actual capital account balance for the entire fund

was less than $3,000.

49. Starting in 2011, MC2 Capital provided investors in the Value Fund with

fabricated Schedule K-1s that depicted increasing account balances, even as the assets in the

Value Fund were substantially depleted.  For example, MC2 Capital issued a Schedule K-1 for

2011 to an investor who had invested $250,000 in the Value fund in November 2008.  The

Schedule K-1 falsely stated that the investor had a year-end capital account balance of $341,490.

In reality, at the end of 2011, the entire Value Fund had only $11,202 in assets.

50. MC2 Canada provided investors in the Canadian Fund with false and misleading

annual Schedule K-1s from 2011 to 2016.  For many Canadian Fund investors, a third-party

accounting firm prepared Schedule K-1s and provided them directly to investors.  To conceal his

appropriation of Canadian Fund investor money, Murakami provided false and incomplete

information about the fund’s investors to the firm, so the resulting Schedule K-1s would not

reflect the existence of other investors and investments in the Canadian Fund.  In this way, the

investors who received Schedule K-1s from the accounting firm saw account balances which

generally fit their expectations.  Meanwhile, for the investors whose existence Murakami

concealed from the accounting firm, Murakami fabricated Schedule K-1s which falsely reported

the existence and/or size of their capital account balances.

B. The Defendants Provided Investors With False Individual Account
Statements

51. The defendants routinely provided investors in the Partners Fund, the Value Fund,

and the Canadian Fund with false monthly individual account statements.  As investment

advisers and fiduciaries, the defendants were supposed to accurately report how the funds were

actually performing, without misleading investors by omitting to state material facts about the

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funds.  Instead, the defendants lied to investors by reporting phony profits and did not inform

investors of trading losses, misappropriation, or that the funds lacked sufficient assets to repay

investors.  As a result, investors received serial monthly account statements which grossly

overstated their actual capital account balance.

52. For example, on October 1, 2010, MC2 Capital provided a couple who had

invested a combined $187,000 in the Partners Fund in February 2008 with a monthly report

reflecting that their combined capital account was over $215,000.  In reality, at the time, the

Partners Fund had only $74,601 in total assets.

C. The Defendants Provided Investors With False Fund Performance Updates

53. Although the defendants held themselves out as investment advisers and

fiduciaries who were accurately reporting fund performance to investors, they regularly provided

investors in the Partners Fund, the Value Fund, and the Canadian Fund with false information

about the performance of the funds through periodic emails, letters, in-person meetings, and

phone calls.  Through these formal and informal performance updates, Murakami and Chiat

misrepresented the funds’ actual performance.  The updates failed to account for Murakami’s

misappropriation, and, in the case of the Partners Fund and Value Fund, the funds’ trading

losses.

54. From 2007 to 2016, Murakami and Chiat (until his departure) provided investors

with quarterly and yearly reports or “shareholder letters” for the Partners Fund and Value Fund

which contained false representations about performance, accompanied by a fictitious narrative

describing the funds’ activities, holdings, and market outlook, and often comparing the funds

favorably to the S&P 500.  For example, Chiat emailed a “Performance Letter” to an investor in

December 2007, writing, “We are pleased with our performance, and look forward to continuing

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with our investment thesis.”  The attached performance letter falsely stated that the Partners

Fund was “up 8.2% year-to-date.”  In reality, the fund had suffered significant trading losses and

was down in value.

55. In February 2013, Chiat emailed investors a “2012 Annual Shareholder Letter”

which falsely claimed an annual return of 16.62% for the Value Fund and contained a lengthy

fictional description of the MC2 Capital’s market outlook and the Value Fund’s holdings and

activities.  In reality, the Value Fund had less than $15,000 in total assets at the end of 2012 and

was no longer actively trading.

56. With respect to the Canadian Fund, Murakami and Chiat (until his departure),

adapted Donville Kent’s monthly newsletters to Capital Ideas Fund investors, replaced

references to that fund with the Canadian Fund, substituted the Canadian Fund’s purported

performance numbers for the Capital Ideas Fund’s performance numbers, and distributed them to

investors, falsely indicating that Donville Kent had authored a performance newsletter

specifically directed to Canadian Fund investors.  The Canadian Fund performance numbers

contained in the newsletter were misleading in that they failed to account for Murakami’s

misappropriation of investor funds, and thus overstated the fund’s performance.  In other words,

even when Donville Kent’s trading in securities on behalf of the Canadian Fund resulted in a

profit, the fund’s overall net performance was overstated because it failed to account for the

substantial amounts that Murakami had misappropriated from the fund.

57. Murakami and Chiat also regularly misled investors in all three funds in more

informal communications.  For example, in November 2008, despite the Partners Fund’s losses

in the preceding two months, Chiat emailed one Partners Fund investor that “[e]verything is

going well here,” and that “[w]e are doing fine given the volatility in the market . . . .”

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Murakami and Chiat regularly spoke in person or by phone with investors and prospective

investors, and misled them by lying about fund performance or by omitting to inform them of the

true status of the funds.

D. Donville Kent’s Termination of Its Relationship with the Defendants

58. On February 27, 2015, Donville Kent gave notice of its termination of its

relationship with MC2 Canada and the Canadian Fund.  Murakami concealed this termination

from investors and the fund’s auditor in order to mislead investors into thinking their investments

were safe and remained under the management of Donville Kent.

59. For example, in June 2015, Murakami provided Canadian Fund investors with an

audited financial statement for the Canadian Fund which falsely represented that the Canadian

Fund still had a relationship with Donville Kent, and affirmatively stated that there had been no

material changes to the operations of the fund since the end of 2014.

E. Murakami Furnished Investors With Fabricated Third Party Statements

60. Following Chiat’s departure and Donville Kent’s termination of its relationship

with MC2 Canada and the Canadian Fund in the spring of 2015, Murakami began receiving

frequent complaints from investors about receiving irregular, belated, and seemingly inaccurate

account statements, and expressing concern about the integrity of the funds and Murakami.

From 2015 to the present, many investors in the three MC2 funds made requests to withdraw the

full amount of their investments.  Murakami sought to avoid and delay these redemptions

through a litany of excuses.  To forestall their redemption requests, Murakami furnished several

investors with fabricated documents purporting to be from the Partners Fund’s former broker.

These fabricated brokerage records falsely showed substantial assets held in MC2-related

accounts and in individual investor accounts.  In reality, as of 2015, neither Murakami nor any

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MC2 entity, fund, or investor therein held any accounts at that brokerage firm and had not since

2011.

III. The Defendants Fraudulently Solicited Additional Investments and Investors

61. Both Murakami and Chiat were well aware that their ability to raise new money

depended on painting a successful picture of the funds.  They used the same and similar

misstatements as described above to solicit new investors and additional amounts from existing

investors.

62. For example, in one email, Chiat informed Murakami that relatives who had

invested wanted “to see the results that we can bring, and WILL give additional capital three and

six months into it.”  In 2008, after Murakami and Chiat provided them with false reports of the

return on their initial investment, these investors invested an additional $1.25 million in the

Partners Fund.

63. Murakami and Chiat solicited investments in all three funds utilizing gross

misrepresentations about the funds’ history and performance, and without disclosing the material

fact that the funds lacked sufficient assets to repay investors.  They frequently provided investors

and prospective investors with marketing materials, shareholder letters, and monthly reports

containing false and misleading information about track record and performance.

64. For example, the first investor in the Value Fund invested $250,000 in November

2008.  In May 2008, Chiat emailed the investor a document on MC2 Capital letterhead which

purported to reflect “the unaudited monthly results for MC2 Capital Management as of May 28,

2008.”  That document reported 2007 returns of 6.5% and 2008 year-to-date results of 7.25%.

Over successive months, Chiat sent the investor similar performance letters and, on November 3,

2008, emailed him a monthly performance letter which claimed returns of -1.15% in September

2008 and -4.90% in October 2008, with a year-to-date return of 3.25%.  In reality, as of late 2008

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there were still no investors in the Value Fund, and, as described above, the Partners Fund

(sharing the same advisers and purported investment strategy) had just suffered devastating

losses.

65. After the Value Fund had been subscribed by investors, Murakami and Chiat

continued to market the fund to prospective investors using false information about performance

and history, and to mislead investors by omitting important facts.  For example, in October 2010,

MC2 Capital distributed a marketing presentation which touted the Value Fund’s purported past

performance:  “MC2 Value Fund returned .86% in 2008, 10.29% in 2009, and 6.31% YTD (end

of third quarter 2010).”  In reality, the Value Fund had lost money each year of its operations.

66. Murakami and Chiat made false representations about the Partners Fund and the

Value Fund to several investors who ultimately invested in the Canadian Fund.  These

misrepresentations falsely portrayed Murakami and Chiat as successful hedge fund managers.  In

reality, their two funds were defunct and they owed investors large amounts of money they did

not have.  For example, Murakami and Chiat sent a series of misstatements regarding the

Partners Fund and the Value Fund from October 2008 to 2012 to an investor who ultimately

invested a total of $100,000 in the Canadian Fund in 2012.

IV. Murakami Misappropriated Investor Money While Chiat Recklessly Misled
Investors

A. Murakami Misappropriated Investor Money for Personal and Business Use

67. The defendants together raised over $15 million from investors in total for the

Partners Fund, the Value Fund, and the Canadian Fund.  From March 2008 through 2016,

Murakami took and spent more than $8 million in total from the three funds on personal and

business expenses.

20

68. Murakami misappropriated funds by wire transfers from the funds’ brokerage

accounts into bank accounts he controlled in the names of the MC2 funds or entities, or by

retaining new investments in those bank accounts rather than transferring the money into the

funds’ brokerage accounts.

69. Murakami spent approximately $2.7 million of these misappropriated investor

funds directly from MC2-entity bank accounts to finance personal and business expenses.

Murakami used an additional $1.8 million of misappropriated investor money held in MC2-

entity bank accounts to pay off large balances on his personal credit card.

70. Murakami frequently transferred misappropriated investor money from MC2-

entity bank accounts into his personal bank accounts.  In total, Murakami transferred

approximately $3.7 million of misappropriated investor money into his personal accounts.  He

spent much of this money on personal expenses such as luxury automobiles, clothing, sporting

events, meals, flights, and hotels.

B. Murakami Made Ponzi-Like Payments to Earlier Investors Using Money
Received from Later Investors

71. In some cases, investors sought to withdraw their money and Murakami paid to

investors the amount reflected on their current (but falsely inflated) capital account statement.

Murakami paid these investors not only their invested capital, but also the phony profits that

Murakami and Chiat had reported to them.  Approximately $5.4 million of the $15 million raised

by Murakami and Chiat for all three funds was paid out to such investors.  That included

approximately $1.3 million which Murakami paid as purported investment gains, to be consistent

with the phony account statements, and in furtherance of his scheme.

72. In several cases, Murakami used money that he misappropriated from the

Canadian Fund investors to pay Partners Fund and Value Fund investors who requested

withdrawals.  For example, in December 2014, an investor requested a complete withdrawal

from the Value Fund and the Canadian Fund.  In January 2015, Murakami paid the investor a

total of $963,753, purportedly from his Value Fund and Canadian Fund capital accounts.  In

reality, all of the money came from the Canadian Fund.  Murakami falsely informed Donville

Kent, Chiat, and the fund’s independent administrator that the money went to other Canadian

Fund investors, and created fake wire transfer records to bolster this false claim.

C. Murakami Used the Services of Independent Fund Administrators and
Auditors to Create a False Appearance of Security and Legitimacy

73. Murakami procured the services of third parties to lend a patina of safety and

legitimacy to the Canadian Fund.  For example, Murakami told Canadian Fund investors that that

the fund was administered by an independent fund administrator, thereby giving the impression

that an independent third party was calculating capital account balances and investment returns.

To conceal his misappropriation, Murakami provided false information to the fund administrator

about investors’ existence, amount and timing of investments, and withdrawals.   The fund

administrator then calculated capital account balances and investment returns using the false

information, and generated account statements that Murakami knew were false.  The fund

administrator then provided the statements to investors.

74. In early to mid-2015, several Canadian Fund investors complained that they were

not receiving account statements regularly, and that their statements appeared to be inconsistent.

Murakami retained an independent auditor to audit the Canadian Fund’s financial statements for

the year 2014.  Murakami told investors that the audit firm was conducting an audit, and used the

fact of their ongoing work as an assurance of integrity.  Murakami provided the auditor with

false information during the audit and, as a result, the audited financial statements did not

accurately reflect the fund’s liabilities to its investors, which were greater than its assets.  In mid-

22

2015, Murakami furnished the false financial statements to investors in order to assuage their

concerns so that they would not request withdrawals.

D. Chiat Misled Investors and Prospective Investors by Omitting to State
Material Facts About Murakami’s Misappropriation Scheme

75. In dealing with investors and prospective investors, Chiat held himself out as an

investment adviser and a fiduciary.  Chiat was prohibited by law from making an untrue

statement of material fact or omitting to state a material fact necessary to make his statements

made not misleading.  Contrary to his obligations, Chiat misled investors into believing that he

was intimately involved in the operations of three successful hedge funds, and omitted to state a

multitude of material facts that he knew about which suggested that Murakami was

misappropriating investor money.

76. Chiat knew but omitted to state to investors that Murakami had virtually

unfettered and sole control over investor money, and that after 2011 Chiat did not have access to

the bank accounts and brokerage accounts which held that money, despite Chiat asking for such

access on multiple occasions.

77. Chiat knew or suspected that Murakami used Canadian Fund money to make

Ponzi-like payments to Partners Fund and Value Fund investors who sought withdrawals, but

omitted to state this to investors and prospective investors.  Chiat knew that the Partners Fund

and Value Fund were insolvent when he began soliciting investments in the Canadian Fund, and

that for years he and Murakami had led investors to believe that their investments were

flourishing by making repeated misstatements of fund performance and individual account

balances.  For example, when a substantial investor in the Value Fund sought to withdraw all of

his funds in January 2015, Chiat had no reasonable basis for believing that the Value Fund had

sufficient assets to pay him.  Chiat knew about this investor’s large withdrawal and about a

23

contemporaneous large wire transfer from the Canadian Fund, specifically questioned to whom it

went, and expressed disbelief to Murakami about Murakami’s assertion that it went to a different

Canadian Fund investor.

78. Chiat knew but omitted to state to Canadian Fund investors and prospective

investors that Murakami frequently kept money received from new investors in bank accounts

that only Murakami controlled, rather than transferring it into the Canadian Fund’s brokerage

account so that it could be traded by Donville Kent as promised to investors.

79. Chiat knew but omitted to state to Canadian Fund investors and prospective

investors that Murakami gave false information about the amount of an incoming investment to

Donville Kent and kept the remainder in a bank account that only Murakami controlled.  In May

2013, Chiat understood that Murakami withheld $50,000 from a $150,000 investment prior to the

funds being transferred to the Canadian Fund’s brokerage account and that Murakami had falsely

informed Donville Kent (which had access to the brokerage account and the ability to see the

amount of new investments) that the investor may have only been investing $100,000.  Chiat

requested that Murakami give him access to MC2-entity and fund bank accounts, and expressed

the need to have a “second pair of eyes” on those accounts.  Nevertheless, after Murakami failed

to provide Chiat with access to the bank accounts, Chiat continued to solicit investments in the

Canadian Fund until early 2015.

80. Chiat knew but omitted to state to investors and prospective investors that

Murakami often sought to exclude Chiat from communications about the amount, timing, and

destination of investors’ incoming wire transfers.  For example, on May 27, 2013, Chiat learned

that Murakami was attempting to exclude Chiat from future communications with an incoming

Canadian Fund investor whom Chiat had just solicited, and whom Chiat knew intended to invest

24

$100,000.  The investor had not yet wired his initial investment.  Chiat recognized, at a

minimum, that his lack of information about the Canadian Fund’s accounts and operations was

inconsistent with his ongoing solicitation of investments in the Canadian Fund.  He complained

to Murakami, “I am trying to sell a fund that I know nothing about at all.”  On or about June 6,

2013, the investor wired $100,000 into a bank account controlled by Murakami.  Murakami

deposited only $50,000 of that amount into the Canadian Fund brokerage account and

misappropriated the rest.

81. Chiat knew but omitted to state to investors and prospective investors that money

was taken out of the Canadian Fund under circumstances that Chiat found highly suspicious, and

that Chiat did not believe Murakami’s explanation for it was truthful.  On or about May 30,

2014, Murakami wired $475,000 from the Canadian Fund’s brokerage account to a bank account

he controlled in the name of MC2 Canada, and $20,750 to Chiat, for a combined total of

$495,750 out of the Canadian Fund.  Through a series of subsequent transfers, Murakami

misappropriated the $475,000.  Of the $475,000, Murakami (1) used $160,000 to repay an

investor in the Value Fund; (2) used $72,000 for a payment for his personal credit card; (3)

transferred over $180,000 into his personal bank accounts; and (4) paid $50,000 to an investor

which included payment of purported investment returns from the Value Fund.

82. Chiat learned that approximately $495,000 had been or was being wired out of the

Canadian Fund.  Murakami falsely told Chiat that it was for a partial withdrawal from the

Canadian Fund by a family office investor.  In reality, that investor had not requested a

withdrawal.  Chiat was aware of a heightened risk of misappropriation, and wrote to Murakami,

“It is simple, an investor wants $495,000, and I want to confirm it with someone besides you.”

Chiat threatened to contact the family office investor directly for confirmation, but did not do so.

25

Chiat also threatened to contact the brokerage firm for confirmation, but did not do so.  On June

3, 2014, Murakami wrote to Chiat:

Reminder to you.  We are audited and currently being audited by one of the
largest firms on the planet.  We have an admin that is going over EACH and
EVERY transaction we have done since inception.  There is no chance of what
your worst fears are, because EVERYTHING is trackable. . . . Your worst
fears are not only unfounded, but impossible to happen at this point.  Even if
we went with your worst case fears, it would be tracked.

83. Later that day, Murakami wrote to Chiat, “You[r] accusations and attitude are

never going to be forgotten by me.”  Instead of contacting the family office investor or brokerage

firm, Chiat continued to solicit new investments in the Canadian Fund, just as he had before,

omitting to state his serious concerns.  In the next several days, Chiat coordinated a phone call

between a prospective investor and Donville Kent, sent an email to the financial advisor for a

Canadian Fund investor touting positive performance and attaching a recent newsletter, and

arranged the details of a $50,000 additional investment in the Canadian Fund by an existing

investor.  Chiat misled these investors by omitting to inform them of the facts suggesting a

substantial risk of Murakami misappropriating their money.

84. In 2016, after years of lying to investors, turning a blind eye to Murakami’s

stealing, and violating his duties as an investment adviser and fiduciary, Chiat took advantage of

Murakami’s misappropriation scheme for his personal benefit and to the detriment of Canadian

Fund investors.  Chiat requested withdrawals from the Partners Fund on behalf of himself and

relatives who were investors.  Murakami used money from the Canadian Fund to pay Chiat and

two of Chiat’s relatives, purportedly as withdrawals of their invested capital and phony returns in

the Partners Fund.  In reality, Chiat knew that the Partners Fund investments had been lost in

2007 and 2008, but nevertheless requested and received a payment in April 2016 of $195,022 for

26

himself, and arranged for relatives to receive a total $690,069, all of which came from the

Canadian Fund.

CONCLUSION

85. By misrepresenting fund performance and individual account balances to

investors, soliciting new investments by misrepresenting the funds’ track records, and through

Murakami’s misappropriating investor money for personal and business use, the defendants

caused losses to investors of more than $11.2 million, all in violation of the laws of the United

States as set forth below.

FIRST CLAIM FOR RELIEF
(Violation of Section 10(b) of the Exchange Act and Rule 10b-5)

(All Defendants)

86. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

87. The defendants, directly or indirectly, acting intentionally, knowingly or

recklessly, by the use of means or instrumentalities of interstate commerce or of the mails, in

connection with the purchase or sale of securities:  (a) have employed or are employing devices,

schemes or artifices to defraud; (b) have made or are making untrue statements of material fact

or have omitted or are omitting to state material facts necessary to make the statements made, in

light of the circumstances under which they were made, not misleading; or (c) have engaged or

are engaging in acts, practices, or courses of business which operate as a fraud or deceit upon

certain persons.

88. As a result, the defendants have violated and, unless enjoined, will continue to

violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17

C.F.R. § 240.10b-5.

27

SECOND CLAIM FOR RELIEF
(Violation of Section 17(a) of the Securities Act)

(All Defendants)

89. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

90. The defendants, directly or indirectly, acting intentionally, knowingly or

recklessly, in the offer or sale of securities by the use of the means or instruments of

transportation or communication in interstate commerce or by the use of the mails:  (a) have

employed or are employing devices, schemes or artifices to defraud; (b) have obtained or are

obtaining money or property by means of untrue statements of material fact or omissions to state

material facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading; or (c) have engaged or are engaging in

transactions, practices or courses of business which operate as a fraud or deceit upon purchasers

of the securities.

91. As a result, the defendants have violated and, unless enjoined, will continue to

violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).

THIRD CLAIM FOR RELIEF
(Violation of Sections 206(1) and 206(2) of the Advisers Act)

(All Defendants)

92. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

93. Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada Capital

Management, LLC, each operated as an “investment adviser” within the meaning of Section

202(a)(11) of the Advisers Act, 15 U.S.C. § 80b-2(a)(11).  Murakami and Chiat served in that

capacity with respect to the Partners Fund, the Value Fund, and the Canadian Fund.  MC2

28

Capital Management, LLC, served in that capacity as to the Partners Fund and the Value Fund.

MC2 Canada Capital Management served in that capacity for the Canadian Fund.

94. As alleged herein, Murakami, Chiat, MC2 Capital Management, LLC, and MC2

Canada Capital Management, LLC, while acting as investment advisers, directly or indirectly, by

use of the mails or means and instrumentalities of interstate commerce, knowingly, willfully, or

recklessly: (a) employed or are employing devices, schemes, or artifices to defraud clients; and

(b) engaged or are engaging in transactions, practices, and courses of business which operated

and operate as a fraud or deceit upon clients.

95. As a result, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada

Capital Management, LLC, violated, and unless enjoined will continue to violate, Sections

206(1) and 206(2) of the Advisers Act, 15 U.S.C. §§ 80b-6(1)-(2).

FOURTH CLAIM FOR RELIEF
(Violation of Sections 206(4) of the Advisers Act and Rule 206(4)-8 Thereunder)

(All Defendants)

96. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

97. Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada Capital

Management, LLC, each operated as an “investment adviser” within the meaning of Section

202(a)(11) of the Advisers Act, 15 U.S.C. § 80b-2(a)(11).  Murakami and Chiat served in that

capacity with respect to the Partners Fund, the Value Fund, and the Canadian Fund.  MC2

Capital Management, LLC, served in that capacity as to the Partners Fund and the Value Fund.

MC2 Canada Capital Management served in that capacity for the Canadian Fund.

98. The Partners Fund, Value Fund, and Canadian Fund were or are pooled

investment vehicles within the meaning of Rule 206(4)-8(b), 17 C.F.R. § 275.206(4)-8(b).

29

99. As alleged herein, Murakami, Chiat, MC2 Capital Management, LLC, and MC2

Canada Capital Management, LLC, while acting as investment advisers to pooled investment

vehicles, directly or indirectly, by use of the mails or means and instrumentalities of interstate

commerce, engaged or are engaging in acts, practices, or courses of business which were

fraudulent, deceptive, or manipulative.

100. As a result, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada

Capital Management, LLC, violated, and unless enjoined will continue to violate, Sections

206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 15 C.F.R. §

275.206(4)-8.

FIFTH CLAIM FOR RELIEF
(Aiding and Abetting Violations of Sections 206(1), (2) & (4)

and Rule 206(4)-8 thereunder)
(Murakami and Chiat)

101. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

102. Murakami and Chiat knew or recklessly disregarded that MC2 Capital’s and MC2

Canada’s conduct was improper and knowingly rendered to these entities substantial assistance

in this conduct.

103. As a result, Murakami and Chiat aided and abetted MC2 Capital’s and MC2

Canada’s violations of Sections 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1),

(2) & (4), and Rule 206(4)-8 thereunder, 15 C.F.R. § 275.206(4)-8.

SIXTH CLAIM FOR RELIEF
(Other Equitable Relief, Including Unjust Enrichment)

(Relief Defendants)

104. The Commission repeats and incorporates by reference the allegations in the

preceding paragraphs of the Complaint as if set forth fully herein.

30

105. Section 21(d)(5) of the Exchange Act, 15 U.S.C. § 78u(d)(5), states: “In any

action or proceeding brought or instituted by the Commission under any provision of the

securities laws, the Commission may seek, and any Federal court may grant, any equitable relief

that may be appropriate or necessary for the benefit of investors.”

106. The relief defendants have received investors’ funds derived from the unlawful

acts or practices of the defendants under circumstances dictating that, in equity and good

conscience, they should not be allowed to retain such funds.

107. As a result, the relief defendants are liable for unjust enrichment and should be

required to return their ill-gotten gains, in an amount to be determined by the Court.

PRAYER FOR RELIEF

 WHEREFORE, the Commission requests that this Court:

A. Enter a permanent injunction restraining the defendants, as well as their agents,

servants, employees, attorneys, and other persons in active concert or participation with them,

from directly or indirectly engaging in the conduct described above, or in conduct of similar

purport and effect, in violation of:

1. Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5

thereunder, 17 C.F.R. § 240.10b-5;

2. Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a); and

3. Sections 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), (2),

& (4), and Rule 206(4)-8 thereunder, 17 C.F.R. § 275.204(4)-(8).

B. Enter orders permanently enjoining Murakami and Chiat from directly or

indirectly, including but not limited to, through any entity they own or control, participating in

the issuance, purchase, offer, or sale of any security, provided, however, that such injunctions

31

shall not prevent Murakami or Chiat from purchasing or selling securities for their own personal

accounts;

C. Order the defendants to disgorge their ill-gotten gains, plus prejudgment interest;

D. Order the relief defendants to disgorge all unjust enrichment and/or ill-gotten gain

received from the defendants, plus prejudgment interest;

E. Order the defendants to pay an appropriate civil monetary penalty pursuant to

Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3); Section 20(d) of the Securities Act,

15 U.S.C. § 77t(d); and Section 209(e)(1) of the Advisers Act, 15 U.S.C. § 80b-9(e);

F. Retain jurisdiction over this action to implement and carry out the terms of all

orders and decrees that may be entered; and

G. Award such other and further relief as the Court deems just and proper.

DEMAND FOR JURY TRIAL

 The Commission demands a jury trial on all claims so triable.

Dated:  May 22, 2017

32

Respectfully submitted:

SECURITIES AND EXCHANGE
COMMISSION

By its attorneys,

/s/ David M. Scheffler
David M. Scheffler (Mass. Bar. No. 670324)

       Enforcement Counsel
Colin D. Forbes (NY No. 4664264 DC No. 992043)

       Senior Enforcement Counsel
Martin F. Healey (Mass. Bar No. 227550)

Regional Trial Counsel
      Celia D. Moore (Mass. Bar. No. 542136)
       Assistant Regional Director
      Boston Regional Office
      33 Arch Street, 24th Floor
      Boston, MA 02110
      (617) 573-4574 (Forbes direct)
      (617) 573-8810 (Scheffler direct)
      (617) 573-4590 (fax)
      [email protected]
      [email protected]

1 
 

UNITED STATES DISTRICT COURT 
DISTRICT OF MASSACHUSETTS 

___________________________________________ 
) 

SECURITIES AND EXCHANGE COMMISSION, ) 
) 

Plaintiff,   ) 
) 

v.      ) Case No.  
) 

YASUNA MURAKAMI; AVI CHIAT;   ) JURY TRIAL DEMANDED 
MC2 CAPITAL MANAGEMENT, LLC; MC2  ) 
CANADA CAPITAL MANAGEMENT, LLC; ) 
       ) 
   Defendants,   ) 
       ) 
 And      ) 
       ) 
MC2 CAPITAL PARTNERS, LLC; MC2 CAPITAL  ) 
VALUE PARTNERS, LLC; MC2 CAPITAL  ) 
CANADIAN OPPORTUNITIES FUND, LLC, ) 
       ) 
   Relief Defendants  ) 
___________________________________________ ) 

COMPLAINT 

 Plaintiff Securities and Exchange Commission (the “Commission”) alleges the following 

against the defendants, Yasuna Murakami (“Murakami”); Avi Chiat (“Chiat”); MC2 Capital 

Management, LLC (“MC2 Capital”); and MC2 Canada Capital Management, LLC (“MC2 

Canada”); and the relief defendants, MC2 Capital Partners, LLC (the “Partners Fund”); MC2 

Capital Value Partners, LLC (the “Value Fund”); and MC2 Capital Canadian Opportunities 

Fund, LLC (the “Canadian Fund”), and hereby demands a jury trial: 

PRELIMINARY STATEMENT 

1. From 2007 to 2016, Yasuna Murakami and Avi Chiat defrauded more than 50 

investors in three hedge funds run by their two-person investment advisory businesses, MC2 

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2 
 

Capital and MC2 Canada, and violated their fiduciary duties as advisers to those funds, by lying 

to investors about the funds’ performance in falsified account statements, falsified tax 

documents, falsified performance letters, and other misleading communications. 

2. Murakami and Chiat raised more than $15 million from investors, and misled 

investors into believing they had invested it profitably.  In reality, through unprofitable trading 

Murakami and Chiat lost more than 70% of the money raised for their first hedge fund in less 

than two years, and over nearly a decade Murakami stole more than $8 million of investor funds 

and spent those funds on personal and business expenses.  Murakami used an additional $1.3 

million of investor funds to make Ponzi-like payments to earlier investors as purported 

investment gains, using money he misappropriated from later investors.  Chiat misled investors 

and prospective investors not only by lying about the performance of the funds, but also by 

omitting to inform them of many important facts suggesting there was a high risk that Murakami 

was stealing investor money. 

3. By virtue of the defendants’ fraudulent conduct, which is detailed further herein, 

the defendants engaged in:   

a. fraud or deceptive conduct in connection with the purchase or sale of 

securities, in violation Section 10(b) of the Exchange Act of 1934 (“Exchange 

Act”) and Rule 10b-5 thereunder;  

b. fraud in the offer or sale of securities, in violation of Section 17(a) of the 

Securities Act of 1933 (“Securities Act”); 

c. fraud or deceptive conduct upon advisory clients in violation of Sections 

206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”); 

and  

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3 
 

d. fraud or deceptive conduct by an investment adviser to a pooled investment 

vehicle, in violation of Section 206(4) of the Advisers Act and Rule 206(4)-8 

thereunder. 

4. Murakami and Chiat also aided and abetted MC2 Capital’s and MC2 Canada’s 

violations of Sections 206(1), (2) & (4) of the Advisers Act and Rule 206(4)-8 promulgated 

thereunder. 

5. The Commission seeks a permanent injunction and disgorgement pursuant to 

Section 21(d)(1) of the Exchange Act, 15 U.S.C. § 78u(d)(1), Section 20(b) of the Securities Act, 

15 U.S.C. § 77t(b), and Section 209(d) of the Advisers Act, 15 U.S.C. § 80b-9(d).  The 

Commission seeks the imposition of civil penalties pursuant to Section 21(d) of the Exchange 

Act, 15 U.S.C. § 78u(d), Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 

209(e) of the Advisers Act, 15 U.S.C. § 80b-9(e).  

JURISDICTION 

6. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 

27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), & 78aa, Sections 20(d) and 22(a) of the 

Securities Act, 15 U.S.C. §§ 77t(d), 77v(a), and Sections 209(d), 209(e), and 214 of the Advisers 

Act, 15 U.S.C. §§ 80b-9(d), 80b-9(e), 80b-14. 

7. Venue is proper in this District because the individual defendants reside in 

Massachusetts, all defendants transacted business in Massachusetts, and many investors are 

located here. 

8. In connection with the conduct described in this Complaint, the defendants 

directly or indirectly made use of the mails or the means or instruments of transportation or 

communication in interstate commerce. 

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4 
 

9. The defendants’ conduct has involved fraud, deceit, or deliberate or reckless 

disregard of regulatory requirements, and has resulted in substantial loss, or significant risk of 

substantial loss, to other persons. 

DEFENDANTS 

10. Yasuna Murakami is a resident of Cambridge, Massachusetts.  Since 2007, 

Murakami has been a partner and portfolio manager at MC2 Capital.  Since 2011, Murakami has 

been a partner and portfolio manager at MC2 Canada.  Since 2007, Murakami has solicited 

investments in three hedge funds he created and managed through MC2 Capital and MC2 

Canada.  On December 19, 2016, Murakami appeared before officers of the Commission to 

provide sworn testimony and asserted his Fifth Amendment privilege against self-incrimination 

in response to all questions regarding MC2 Capital, MC2 Canada, and the three hedge funds he 

operated. 

11. Avi Chiat is a resident of Wellesley, Massachusetts.  Between August 2007 and 

2015, Chiat was a partner and portfolio manager at MC2 Capital.  Between 2011 and 2015, Chiat 

was a partner and portfolio manager at MC2 Canada.  In 2007, Chiat was registered with the 

Financial Industry Regulatory Authority, Inc., and the Commonwealth of Massachusetts as a 

registered representative of a brokerage firm.  Those registrations were terminated on July 18, 

2007.  From May 2015 to April 2017, Chiat was registered with the Commonwealth of 

Massachusetts as an investment adviser representative at a Cambridge, Massachusetts investment 

advisory firm.  Chiat is an attorney who was admitted to the Massachusetts bar on June 20, 2016, 

and is currently an inactive member.  

12. MC2 Capital Management, LLC (“MC2 Capital”) is a limited liability 

company organized on August 17, 2007, in the Commonwealth of Massachusetts, with a 

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5 
 

principal place of business in Cambridge, Massachusetts.  Murakami and Chiat were the sole 

managers of MC2 Capital.  MC2 Capital was the Managing Member of and investment adviser 

to two hedge funds, the Partners Fund and the Value Fund, and was responsible for the funds’ 

investments and day-to-day activities.  MC2 Capital has never registered with the Commission. 

13. MC2 Canada Capital Management, LLC (“MC2 Canada”) is a limited 

liability company organized on May 18, 2011, in the Commonwealth of Massachusetts, with a 

principal place of business in Cambridge, Massachusetts.  MC2 Canada was the Managing 

Member of and investment adviser for the Canadian Fund.  Murakami, Chiat, and Donville Kent 

Asset Management Inc. (“Donville Kent”) were members of MC2 Canada, which entitled each 

to share in the management and performance fees from managing the Canadian Fund.  From 

2011 to May 2015, Donville Kent managed the Canadian Fund’s investments.  MC2 Canada has 

never registered with the Commission. 

RELIEF DEFENDANTS 

14. MC2 Capital Partners, LLC (the “Partners Fund”), is a limited liability 

company organized on August 17, 2007, in the State of Delaware, with a principal place of 

business in Cambridge, Massachusetts.  The Partners Fund is a pooled investment vehicle which 

was managed by Murakami and Chiat through MC2 Capital.  The Partners Fund has never 

registered with the Commission. 

15. MC2 Capital Value Partners, LLC (the “Value Fund”), is a limited liability 

company organized on August 28, 2008, in the State of Delaware, with a principal place of 

business in Cambridge, Massachusetts.  The Value Fund is a pooled investment vehicle which 

was managed by Murakami and Chiat through MC2 Capital.  The Value Fund has never 

registered with the Commission. 

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16. MC2 Capital Canadian Opportunities Fund, LLC (the “Canadian Fund”), is 

a limited liability company organized on May 18, 2011, in the State of Delaware, with a 

principal place of business in Cambridge, Massachusetts.  The Canadian Fund is a pooled 

investment vehicle managed by Murakami, Chiat (until early 2015), and Donville Kent (until 

May 2015) through MC2 Canada.  The Canadian Fund has never registered with the 

Commission. 

STATEMENT OF FACTS 

I. Fund and Investment History  

A. MC2 Capital and The Partners Fund 

17. In August 2007, Yasuna Murakami and his business partner Avi Chiat launched a 

hedge fund advisory firm, MC2 Capital, and their first hedge fund, the Partners Fund.  

18. The Partners Fund was set up as a limited liability company, or LLC, a corporate 

structure through which the “members” of the LLC are entitled to share in the profits of the 

company.  To become an investor in the Partners Fund, an individual purchased an interest in the 

fund and became a “non-managing member” of the fund.  This was done by signing a 

Subscription Agreement and providing the amount of their investment to the Managing Member, 

MC2 Capital.  The Subscription Agreement provided that the terms of the investment were 

further specified in the fund’s Private Placement Memorandum (“PPM”), a document which is 

typically provided to prospective investors and describes the terms of a private offering for sale 

of a security.  

19. The Partners Fund had a PPM which Murakami and Chiat provided to investors.  

It described the fund’s investment strategy as “based upon the value investing style of the 

‘Graham & Dodd’ school,” according to which “the Fund will seek to make investments in 

companies and sectors whose shares appear to be under-priced. . . .”   

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20. MC2 Capital was the Managing Member of the Partners Fund, and Murakami and 

Chiat were the sole Managers of MC2 Capital.  MC2 Capital, Murakami, and Chiat acted as 

investment advisers to the Partners Fund, and were responsible for day-to-day management of its 

investments.  As such, they assumed a fiduciary duty to serve in the best interest of the Partners 

Fund.  Investors in the fund expected to earn profits on their investments, and the success thereof 

depended solely on the efforts of MC2 Capital, Murakami, and Chiat. 

21. According the Partners Fund’s PPM, MC2 Capital was entitled to be compensated 

for investment adviser services it provided to the Partners Fund by (1) a monthly management 

fee, equal to one-twelfth of 2% of the fund’s Net Asset Value1 (“NAV”), and (2) a performance 

fee of 20% of any increase in the NAV for each quarter, subject to a “high water” provision.2  

The PPM further represented that MC2 Capital would be permitted a $50,000 advance, 

purportedly to pay for setup costs, which was to be credited against future management fees. 

22. Murakami and Chiat raised $2,043,580 in Partners Fund investments in 2007, 

primarily from relatives of Chiat, but also including $200,000 invested by Murakami and 

$100,000 by Chiat.   

23. Murakami and Chiat used this money to trade in securities on behalf of the 

Partners Fund using a brokerage account in the name of the Partners Fund.  Partners Fund 

investors sent their money to the fund’s brokerage account by wire or check, where it could then 

be utilized for trading.  Murakami and Chiat directed the Partners Fund’s trading. 

                                                 
1 A fund’s “Net Asset Value” is the value of its assets minus its liabilities. 
 
2 A “high water” provision prevents the payment of a performance fee when more recent 
investment returns do not make up for previous investment losses, i.e., the fund remains below 
its “high water” mark. 
 

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24. In November 2007, Murakami’s and Chiat’s trading resulted in substantial losses 

for the Partners Fund.  By the end of 2007, the fund had only $1,388,610 in total assets, having 

lost nearly one-third of its value. 

25. In 2008, Murakami and Chiat raised an additional $1,637,000 in investments in 

the Partners Fund.  

26. In March 2008, Murakami began systematically misappropriating investor money 

from the Partners Fund.  Murakami directed wires of money from the brokerage account to bank 

accounts he controlled in the names of MC2 Capital Management LLC and MC2 Capital 

Partners, LLC.  Murakami then used these funds for personal and business expenses, including 

meals, travel, and paying his personal credit card bills. 

27. Murakami’s and Chiat’s trading continued to result in substantial losses for the 

Partners Fund in 2008.  September and October 2008 were particularly devastating, as the fund 

lost more than $1.6 million.  By the end of 2008, more than 80% the $3.68 million that the 

Partners Fund had received from investors was gone.  Approximately $2.7 million had been lost 

in unprofitable trading, while $373,130 had been withdrawn by Murakami, leaving the Partners 

Fund with $598,532 in assets.  

28. In 2009 and 2010, Murakami continued to misappropriate investor money from 

the Partners Fund.  At the end of 2010, the fund was left with only $45,372 in assets.  In 

September 2011, Murakami transferred the Partners Fund brokerage account to a different 

broker, and then drained the account to only a few thousand dollars by the end of November 

2011.  In total, Murakami withdrew more than $1 million from the Partners Fund, grossly in 

excess of any fees to which MC2 Capital was entitled.  At the end of October 2016, the Partners 

Fund had less than $3,000 in assets.   

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B. The Value Fund 

29. In August 2008, Murakami and Chiat created a new fund, the Value Fund.  Like 

the Partners Fund, the Value Fund’s PPM described a purported value-investing strategy and a 

compensation structure through which MC2 Capital would be entitled to a monthly management 

fee (one-twelfth of 2% of the NAV) and a performance fee (20% of the quarterly increase in the 

NAV, subject to a high water provision).   

30. The Value Fund was a pooled investment vehicle, and MC2 Capital was its 

Managing Member.  MC2 Capital, Murakami, and Chiat acted as investment advisers to the 

Value Fund, and were responsible for day-to-day management of its portfolio.  As such, they 

assumed a fiduciary duty to serve in the best interest of the Value Fund.  Investors in the fund 

expected to earn profits on their investments, and the success thereof depended solely on the 

efforts of MC2 Capital, Murakami, and Chiat. 

31. Murakami and Chiat struggled initially to raise investments in the Value Fund, 

receiving $250,000 from one investor in November 2008 and nothing in 2009.  From 2010 to 

2013, Murakami and Chiat raised an additional $585,000 from four new investors.  In total, they 

raised $835,000 in the Value Fund. 

32. Starting in June 2010, Murakami misappropriated substantially all of the Value 

Fund’s assets.  Only $700,000 was actually deposited into the Value Fund’s brokerage account 

and traded.  The remaining $135,000 was deposited instead into a bank controlled by Murakami, 

and used for personal and business expenses.  

33. Out of the $700,000 that was transferred to the brokerage account and traded, 

Murakami withdrew $643,438, which he spent on personal and business expenditures, including 

to cover up his thefts from other funds. 

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C. The Canadian Fund 

34. In 2011, Murakami and Chiat launched another advisory firm, MC2 Canada, and 

a third hedge fund, the Canadian Fund.  Like the earlier funds, the Canadian Fund was set up as a 

limited liability company in which investors could purchase a membership interest by executing 

a Subscription Agreement which incorporated the Canadian Fund’s PPM.  According to the 

PPM, MC2 Canada was entitled to a monthly management fee (one-twelfth of 2% of the NAV) 

and a performance fee (20% of the quarterly increase in the NAV, subject to a high water 

provision).   

35. The Canadian Fund was a pooled investment vehicle, and MC2 Canada was its 

Managing Member.  MC2 Canada, Murakami, and Chiat acted as investment advisers to the 

Canadian Fund and were responsible for its day-to-day management.  Accordingly, they assumed 

a fiduciary duty to serve in the best interest of the Canadian Fund.  Investors in the fund expected 

to earn profits on their investments, and the success thereof depended solely on the efforts of 

MC2 Canada, Murakami, and Chiat.   

36. Murakami, Chiat, and MC2 Canada entered into an arrangement with Donville 

Kent, a Canadian asset management firm, whereby Donville Kent managed the Canadian Fund’s 

investments.  The Canadian Fund’s PPM described its objective as “to mimic the investment 

strategy and investments of the Donville Kent Asset Management Inc. Capital Ideas Fund,” 

which it further described as having the objective to “exceed the annual returns of the S&P 500 

or another index whose return mirrors the S&P,” using a value-investing strategy. 

37. In marketing materials, Murakami and Chiat described the Canadian Fund as 

being “managed by one of the top performing portfolio managers in Canada,” touted the track 

record of the Capital Ideas Fund, and represented that Donville Kent would be “responsible for 

the day-to-day operation of the Funds [sic] pursuant to management agreements.”   

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38. Murakami and Chiat raised approximately $10.93 million for the Canadian Fund 

from investors from 2011 to 2016.   

39. From the Canadian Fund’s inception in 2011 until May 2015, a vice president at 

Donville Kent directed the trading for the Canadian Fund, using the fund’s brokerage account.  

In exchange for its advisory services, Donville Kent was given a membership interest in MC2 

Canada, which entitled Donville Kent to 70% of the management and performance fees earned 

by MC2 Canada.  

40. On February 27, 2015, Donville Kent gave notice of its termination of its 

relationship with MC2 Canada and the Canadian Fund.  Within days, Chiat declared that he 

would no longer be involved in the Canadian Fund or any MC2 entity, and arranged for family 

members and several friends to withdraw their investments in the Canadian Fund.  Following a 

90-day notice period, Donville Kent stopped directing the trading in the Canadian Fund.   

41. From 2011 to 2016, Murakami misappropriated at least $6 million from Canadian 

Fund investors and spent the money on personal and business expenses.  He also withdrew 

approximately $1.3 million from the Canadian Fund and used it to make Ponzi-like payments of 

purported returns to earlier investors.  By the end of November 2016, the Canadian Fund 

brokerage account was empty. 

II. The Defendants Intentionally Misled Investors Regarding the Performance of Their 
Funds 

42. Through MC2 Capital and MC2 Canada, Murakami and Chiat misled investors in 

the Partners Fund, the Value Fund, and the Canadian Fund.  The defendants made these 

misstatements in writing, in falsified tax documents, inflated individual account statements, and 

wholly fictitious reports that falsely represented the funds’ results.  Murakami and Chiat also 

made these misstatements to investors and prospective investors orally, in person or by phone.  

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Although Murakami and Chiat held themselves out to investors as investment advisers to the 

funds, they omitted to state the material facts necessary to make their other statements about the 

funds not misleading.   

43. Murakami and Chiat began making misleading statements to their investors after 

the Partners Fund suffered substantial trading losses in 2007, and continued to do so during the 

duration of their work for MC2 Capital.  Murakami and Chiat made similar misstatements to 

investors in the Value Fund, starting in 2008.  With respect to both funds, Murakami and Chiat 

misled investors by reporting false account balances that far exceeded the actual assets of the 

funds.  

44. Murakami’s and Chiat’s false statements about performance and capital account 

balances to investors in the Canadian Fund concealed Murakami’s misappropriation of investor 

funds, overstated the fund’s performance, and overstated investors’ individual capital account 

balances. 

45. At all relevant times, Murakami and Chiat actually knew, or were reckless in not 

knowing, that their statements to investors about the performance of the funds and that their 

capital account balances therein were false. 

A. The Defendants Provided Investors With Falsified Schedule K-1s 

46. MC2 Capital provided investors in the Partners Fund and the Value Fund with 

Schedule K-1s, a tax form issued annually to investors in a partnership, which reflected account 

balances for individual investors which Murakami and Chiat knew to be false. 

47. MC2 Capital first issued falsified Schedule K-1s to investors in early 2008, 

regarding balances in the Partners Fund at the end of 2007.  As both Murakami and Chiat knew, 

the Partners Fund was audited after the end of 2007 by an independent audit firm, which 

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produced audited financial statements for the Partners Fund, and those audited financial 

statements were provided to Murakami and Chiat.  The audited financial statements for the 

Partners Fund for 2007 reflected substantial trading losses.  In addition to its audit, the 

independent audit firm was tasked with preparing Schedule K-1s for investors in the Partners 

Fund.  To prevent investors from seeing the Partners Fund’s trading losses or losses to their 

account balances, Murakami arranged for the auditor to send investors’ Schedule K-1s directly to 

MC2 Capital, not to investors, and then one or both of Murakami and Chiat fabricated new 

Schedule K-1s which showed phony trading results and account balances and provided those 

fabricated Schedule K-1s to investors.  For example, MC2 Capital provided one pair of husband 

and wife investors with a Schedule K-1 for the Partners Fund which claimed only a small loss.  

In reality, their capital account balance had declined by $505,475, nearly one-third of their 

investment, according to the auditor.  

48. In successive years, MC2 Capital provided Partners Fund investors with falsified 

Schedule K-1s which portrayed increasing capital account balances for individual investors.  In 

reality, the Partners Fund had not only failed to earn profits, it had been reduced to only de 

minimis assets due to the undisclosed trading losses and Murakami’s thefts.  For example, MC2 

Capital provided the husband and wife investors referred to in paragraph 47 with a Schedule K-1 

for 2011 that falsely reflected a gain of more than $700,000 over their initial investment, and a 

total capital account balance at year-end of $3,713,375.  In reality, at the end of 2011, the entire 

Partners Fund had total assets of only $3,548.  This same couple continued to receive fabricated 

Schedule K-1s for the Partners Fund each tax year, continuing through 2015.  The Schedule K-1s 

showed a continuous string of phony profits, ultimately reflecting an ending capital balance of 

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$6,238,835.  In reality, by the end of 2015, the actual capital account balance for the entire fund 

was less than $3,000. 

49. Starting in 2011, MC2 Capital provided investors in the Value Fund with 

fabricated Schedule K-1s that depicted increasing account balances, even as the assets in the 

Value Fund were substantially depleted.  For example, MC2 Capital issued a Schedule K-1 for 

2011 to an investor who had invested $250,000 in the Value fund in November 2008.  The 

Schedule K-1 falsely stated that the investor had a year-end capital account balance of $341,490.  

In reality, at the end of 2011, the entire Value Fund had only $11,202 in assets. 

50. MC2 Canada provided investors in the Canadian Fund with false and misleading 

annual Schedule K-1s from 2011 to 2016.  For many Canadian Fund investors, a third-party 

accounting firm prepared Schedule K-1s and provided them directly to investors.  To conceal his 

appropriation of Canadian Fund investor money, Murakami provided false and incomplete 

information about the fund’s investors to the firm, so the resulting Schedule K-1s would not 

reflect the existence of other investors and investments in the Canadian Fund.  In this way, the 

investors who received Schedule K-1s from the accounting firm saw account balances which 

generally fit their expectations.  Meanwhile, for the investors whose existence Murakami 

concealed from the accounting firm, Murakami fabricated Schedule K-1s which falsely reported 

the existence and/or size of their capital account balances. 

B. The Defendants Provided Investors With False Individual Account 
Statements 
 

51. The defendants routinely provided investors in the Partners Fund, the Value Fund, 

and the Canadian Fund with false monthly individual account statements.  As investment 

advisers and fiduciaries, the defendants were supposed to accurately report how the funds were 

actually performing, without misleading investors by omitting to state material facts about the 

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funds.  Instead, the defendants lied to investors by reporting phony profits and did not inform 

investors of trading losses, misappropriation, or that the funds lacked sufficient assets to repay 

investors.  As a result, investors received serial monthly account statements which grossly 

overstated their actual capital account balance. 

52. For example, on October 1, 2010, MC2 Capital provided a couple who had 

invested a combined $187,000 in the Partners Fund in February 2008 with a monthly report 

reflecting that their combined capital account was over $215,000.  In reality, at the time, the 

Partners Fund had only $74,601 in total assets. 

C. The Defendants Provided Investors With False Fund Performance Updates 

53. Although the defendants held themselves out as investment advisers and 

fiduciaries who were accurately reporting fund performance to investors, they regularly provided 

investors in the Partners Fund, the Value Fund, and the Canadian Fund with false information 

about the performance of the funds through periodic emails, letters, in-person meetings, and 

phone calls.  Through these formal and informal performance updates, Murakami and Chiat 

misrepresented the funds’ actual performance.  The updates failed to account for Murakami’s 

misappropriation, and, in the case of the Partners Fund and Value Fund, the funds’ trading 

losses. 

54. From 2007 to 2016, Murakami and Chiat (until his departure) provided investors 

with quarterly and yearly reports or “shareholder letters” for the Partners Fund and Value Fund 

which contained false representations about performance, accompanied by a fictitious narrative 

describing the funds’ activities, holdings, and market outlook, and often comparing the funds 

favorably to the S&P 500.  For example, Chiat emailed a “Performance Letter” to an investor in 

December 2007, writing, “We are pleased with our performance, and look forward to continuing 

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with our investment thesis.”  The attached performance letter falsely stated that the Partners 

Fund was “up 8.2% year-to-date.”  In reality, the fund had suffered significant trading losses and 

was down in value.   

55. In February 2013, Chiat emailed investors a “2012 Annual Shareholder Letter” 

which falsely claimed an annual return of 16.62% for the Value Fund and contained a lengthy 

fictional description of the MC2 Capital’s market outlook and the Value Fund’s holdings and 

activities.  In reality, the Value Fund had less than $15,000 in total assets at the end of 2012 and 

was no longer actively trading.  

56. With respect to the Canadian Fund, Murakami and Chiat (until his departure), 

adapted Donville Kent’s monthly newsletters to Capital Ideas Fund investors, replaced 

references to that fund with the Canadian Fund, substituted the Canadian Fund’s purported 

performance numbers for the Capital Ideas Fund’s performance numbers, and distributed them to 

investors, falsely indicating that Donville Kent had authored a performance newsletter 

specifically directed to Canadian Fund investors.  The Canadian Fund performance numbers 

contained in the newsletter were misleading in that they failed to account for Murakami’s 

misappropriation of investor funds, and thus overstated the fund’s performance.  In other words, 

even when Donville Kent’s trading in securities on behalf of the Canadian Fund resulted in a 

profit, the fund’s overall net performance was overstated because it failed to account for the 

substantial amounts that Murakami had misappropriated from the fund. 

57. Murakami and Chiat also regularly misled investors in all three funds in more 

informal communications.  For example, in November 2008, despite the Partners Fund’s losses 

in the preceding two months, Chiat emailed one Partners Fund investor that “[e]verything is 

going well here,” and that “[w]e are doing fine given the volatility in the market . . . .”  

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Murakami and Chiat regularly spoke in person or by phone with investors and prospective 

investors, and misled them by lying about fund performance or by omitting to inform them of the 

true status of the funds. 

D. Donville Kent’s Termination of Its Relationship with the Defendants 

58. On February 27, 2015, Donville Kent gave notice of its termination of its 

relationship with MC2 Canada and the Canadian Fund.  Murakami concealed this termination 

from investors and the fund’s auditor in order to mislead investors into thinking their investments 

were safe and remained under the management of Donville Kent.   

59. For example, in June 2015, Murakami provided Canadian Fund investors with an 

audited financial statement for the Canadian Fund which falsely represented that the Canadian 

Fund still had a relationship with Donville Kent, and affirmatively stated that there had been no 

material changes to the operations of the fund since the end of 2014. 

E. Murakami Furnished Investors With Fabricated Third Party Statements 

60. Following Chiat’s departure and Donville Kent’s termination of its relationship 

with MC2 Canada and the Canadian Fund in the spring of 2015, Murakami began receiving 

frequent complaints from investors about receiving irregular, belated, and seemingly inaccurate 

account statements, and expressing concern about the integrity of the funds and Murakami.  

From 2015 to the present, many investors in the three MC2 funds made requests to withdraw the 

full amount of their investments.  Murakami sought to avoid and delay these redemptions 

through a litany of excuses.  To forestall their redemption requests, Murakami furnished several 

investors with fabricated documents purporting to be from the Partners Fund’s former broker.  

These fabricated brokerage records falsely showed substantial assets held in MC2-related 

accounts and in individual investor accounts.  In reality, as of 2015, neither Murakami nor any 

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MC2 entity, fund, or investor therein held any accounts at that brokerage firm and had not since 

2011. 

III. The Defendants Fraudulently Solicited Additional Investments and Investors 

61. Both Murakami and Chiat were well aware that their ability to raise new money 

depended on painting a successful picture of the funds.  They used the same and similar 

misstatements as described above to solicit new investors and additional amounts from existing 

investors. 

62. For example, in one email, Chiat informed Murakami that relatives who had 

invested wanted “to see the results that we can bring, and WILL give additional capital three and 

six months into it.”  In 2008, after Murakami and Chiat provided them with false reports of the 

return on their initial investment, these investors invested an additional $1.25 million in the 

Partners Fund.   

63. Murakami and Chiat solicited investments in all three funds utilizing gross 

misrepresentations about the funds’ history and performance, and without disclosing the material 

fact that the funds lacked sufficient assets to repay investors.  They frequently provided investors 

and prospective investors with marketing materials, shareholder letters, and monthly reports 

containing false and misleading information about track record and performance. 

64. For example, the first investor in the Value Fund invested $250,000 in November 

2008.  In May 2008, Chiat emailed the investor a document on MC2 Capital letterhead which 

purported to reflect “the unaudited monthly results for MC2 Capital Management as of May 28, 

2008.”  That document reported 2007 returns of 6.5% and 2008 year-to-date results of 7.25%.  

Over successive months, Chiat sent the investor similar performance letters and, on November 3, 

2008, emailed him a monthly performance letter which claimed returns of -1.15% in September 

2008 and -4.90% in October 2008, with a year-to-date return of 3.25%.  In reality, as of late 2008 

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there were still no investors in the Value Fund, and, as described above, the Partners Fund 

(sharing the same advisers and purported investment strategy) had just suffered devastating 

losses. 

65. After the Value Fund had been subscribed by investors, Murakami and Chiat 

continued to market the fund to prospective investors using false information about performance 

and history, and to mislead investors by omitting important facts.  For example, in October 2010, 

MC2 Capital distributed a marketing presentation which touted the Value Fund’s purported past 

performance:  “MC2 Value Fund returned .86% in 2008, 10.29% in 2009, and 6.31% YTD (end 

of third quarter 2010).”  In reality, the Value Fund had lost money each year of its operations. 

66. Murakami and Chiat made false representations about the Partners Fund and the 

Value Fund to several investors who ultimately invested in the Canadian Fund.  These 

misrepresentations falsely portrayed Murakami and Chiat as successful hedge fund managers.  In 

reality, their two funds were defunct and they owed investors large amounts of money they did 

not have.  For example, Murakami and Chiat sent a series of misstatements regarding the 

Partners Fund and the Value Fund from October 2008 to 2012 to an investor who ultimately 

invested a total of $100,000 in the Canadian Fund in 2012.  

IV. Murakami Misappropriated Investor Money While Chiat Recklessly Misled 
Investors 

A. Murakami Misappropriated Investor Money for Personal and Business Use 

67. The defendants together raised over $15 million from investors in total for the 

Partners Fund, the Value Fund, and the Canadian Fund.  From March 2008 through 2016, 

Murakami took and spent more than $8 million in total from the three funds on personal and 

business expenses. 

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68. Murakami misappropriated funds by wire transfers from the funds’ brokerage 

accounts into bank accounts he controlled in the names of the MC2 funds or entities, or by 

retaining new investments in those bank accounts rather than transferring the money into the 

funds’ brokerage accounts.   

69. Murakami spent approximately $2.7 million of these misappropriated investor 

funds directly from MC2-entity bank accounts to finance personal and business expenses.  

Murakami used an additional $1.8 million of misappropriated investor money held in MC2-

entity bank accounts to pay off large balances on his personal credit card. 

70. Murakami frequently transferred misappropriated investor money from MC2-

entity bank accounts into his personal bank accounts.  In total, Murakami transferred 

approximately $3.7 million of misappropriated investor money into his personal accounts.  He 

spent much of this money on personal expenses such as luxury automobiles, clothing, sporting 

events, meals, flights, and hotels.  

B. Murakami Made Ponzi-Like Payments to Earlier Investors Using Money 
Received from Later Investors 

71. In some cases, investors sought to withdraw their money and Murakami paid to 

investors the amount reflected on their current (but falsely inflated) capital account statement.  

Murakami paid these investors not only their invested capital, but also the phony profits that 

Murakami and Chiat had reported to them.  Approximately $5.4 million of the $15 million raised 

by Murakami and Chiat for all three funds was paid out to such investors.  That included 

approximately $1.3 million which Murakami paid as purported investment gains, to be consistent 

with the phony account statements, and in furtherance of his scheme. 

72. In several cases, Murakami used money that he misappropriated from the 

Canadian Fund investors to pay Partners Fund and Value Fund investors who requested 

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withdrawals.  For example, in December 2014, an investor requested a complete withdrawal 

from the Value Fund and the Canadian Fund.  In January 2015, Murakami paid the investor a 

total of $963,753, purportedly from his Value Fund and Canadian Fund capital accounts.  In 

reality, all of the money came from the Canadian Fund.  Murakami falsely informed Donville 

Kent, Chiat, and the fund’s independent administrator that the money went to other Canadian 

Fund investors, and created fake wire transfer records to bolster this false claim. 

C. Murakami Used the Services of Independent Fund Administrators and 
Auditors to Create a False Appearance of Security and Legitimacy 

73. Murakami procured the services of third parties to lend a patina of safety and 

legitimacy to the Canadian Fund.  For example, Murakami told Canadian Fund investors that that 

the fund was administered by an independent fund administrator, thereby giving the impression 

that an independent third party was calculating capital account balances and investment returns.  

To conceal his misappropriation, Murakami provided false information to the fund administrator 

about investors’ existence, amount and timing of investments, and withdrawals.   The fund 

administrator then calculated capital account balances and investment returns using the false 

information, and generated account statements that Murakami knew were false.  The fund 

administrator then provided the statements to investors.   

74. In early to mid-2015, several Canadian Fund investors complained that they were 

not receiving account statements regularly, and that their statements appeared to be inconsistent.  

Murakami retained an independent auditor to audit the Canadian Fund’s financial statements for 

the year 2014.  Murakami told investors that the audit firm was conducting an audit, and used the 

fact of their ongoing work as an assurance of integrity.  Murakami provided the auditor with 

false information during the audit and, as a result, the audited financial statements did not 

accurately reflect the fund’s liabilities to its investors, which were greater than its assets.  In mid-

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2015, Murakami furnished the false financial statements to investors in order to assuage their 

concerns so that they would not request withdrawals. 

D. Chiat Misled Investors and Prospective Investors by Omitting to State 
Material Facts About Murakami’s Misappropriation Scheme 

75. In dealing with investors and prospective investors, Chiat held himself out as an 

investment adviser and a fiduciary.  Chiat was prohibited by law from making an untrue 

statement of material fact or omitting to state a material fact necessary to make his statements 

made not misleading.  Contrary to his obligations, Chiat misled investors into believing that he 

was intimately involved in the operations of three successful hedge funds, and omitted to state a 

multitude of material facts that he knew about which suggested that Murakami was 

misappropriating investor money.  

76. Chiat knew but omitted to state to investors that Murakami had virtually 

unfettered and sole control over investor money, and that after 2011 Chiat did not have access to 

the bank accounts and brokerage accounts which held that money, despite Chiat asking for such 

access on multiple occasions. 

77. Chiat knew or suspected that Murakami used Canadian Fund money to make 

Ponzi-like payments to Partners Fund and Value Fund investors who sought withdrawals, but 

omitted to state this to investors and prospective investors.  Chiat knew that the Partners Fund 

and Value Fund were insolvent when he began soliciting investments in the Canadian Fund, and 

that for years he and Murakami had led investors to believe that their investments were 

flourishing by making repeated misstatements of fund performance and individual account 

balances.  For example, when a substantial investor in the Value Fund sought to withdraw all of 

his funds in January 2015, Chiat had no reasonable basis for believing that the Value Fund had 

sufficient assets to pay him.  Chiat knew about this investor’s large withdrawal and about a 

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contemporaneous large wire transfer from the Canadian Fund, specifically questioned to whom it 

went, and expressed disbelief to Murakami about Murakami’s assertion that it went to a different 

Canadian Fund investor.           

78. Chiat knew but omitted to state to Canadian Fund investors and prospective 

investors that Murakami frequently kept money received from new investors in bank accounts 

that only Murakami controlled, rather than transferring it into the Canadian Fund’s brokerage 

account so that it could be traded by Donville Kent as promised to investors. 

79. Chiat knew but omitted to state to Canadian Fund investors and prospective 

investors that Murakami gave false information about the amount of an incoming investment to 

Donville Kent and kept the remainder in a bank account that only Murakami controlled.  In May 

2013, Chiat understood that Murakami withheld $50,000 from a $150,000 investment prior to the 

funds being transferred to the Canadian Fund’s brokerage account and that Murakami had falsely 

informed Donville Kent (which had access to the brokerage account and the ability to see the 

amount of new investments) that the investor may have only been investing $100,000.  Chiat 

requested that Murakami give him access to MC2-entity and fund bank accounts, and expressed 

the need to have a “second pair of eyes” on those accounts.  Nevertheless, after Murakami failed 

to provide Chiat with access to the bank accounts, Chiat continued to solicit investments in the 

Canadian Fund until early 2015.   

80. Chiat knew but omitted to state to investors and prospective investors that 

Murakami often sought to exclude Chiat from communications about the amount, timing, and 

destination of investors’ incoming wire transfers.  For example, on May 27, 2013, Chiat learned 

that Murakami was attempting to exclude Chiat from future communications with an incoming 

Canadian Fund investor whom Chiat had just solicited, and whom Chiat knew intended to invest 

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$100,000.  The investor had not yet wired his initial investment.  Chiat recognized, at a 

minimum, that his lack of information about the Canadian Fund’s accounts and operations was 

inconsistent with his ongoing solicitation of investments in the Canadian Fund.  He complained 

to Murakami, “I am trying to sell a fund that I know nothing about at all.”  On or about June 6, 

2013, the investor wired $100,000 into a bank account controlled by Murakami.  Murakami 

deposited only $50,000 of that amount into the Canadian Fund brokerage account and 

misappropriated the rest. 

81. Chiat knew but omitted to state to investors and prospective investors that money 

was taken out of the Canadian Fund under circumstances that Chiat found highly suspicious, and 

that Chiat did not believe Murakami’s explanation for it was truthful.  On or about May 30, 

2014, Murakami wired $475,000 from the Canadian Fund’s brokerage account to a bank account 

he controlled in the name of MC2 Canada, and $20,750 to Chiat, for a combined total of 

$495,750 out of the Canadian Fund.  Through a series of subsequent transfers, Murakami 

misappropriated the $475,000.  Of the $475,000, Murakami (1) used $160,000 to repay an 

investor in the Value Fund; (2) used $72,000 for a payment for his personal credit card; (3) 

transferred over $180,000 into his personal bank accounts; and (4) paid $50,000 to an investor 

which included payment of purported investment returns from the Value Fund.   

82. Chiat learned that approximately $495,000 had been or was being wired out of the 

Canadian Fund.  Murakami falsely told Chiat that it was for a partial withdrawal from the 

Canadian Fund by a family office investor.  In reality, that investor had not requested a 

withdrawal.  Chiat was aware of a heightened risk of misappropriation, and wrote to Murakami, 

“It is simple, an investor wants $495,000, and I want to confirm it with someone besides you.”  

Chiat threatened to contact the family office investor directly for confirmation, but did not do so.  

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Chiat also threatened to contact the brokerage firm for confirmation, but did not do so.  On June 

3, 2014, Murakami wrote to Chiat: 

Reminder to you.  We are audited and currently being audited by one of the 
largest firms on the planet.  We have an admin that is going over EACH and 
EVERY transaction we have done since inception.  There is no chance of what 
your worst fears are, because EVERYTHING is trackable. . . . Your worst 
fears are not only unfounded, but impossible to happen at this point.  Even if 
we went with your worst case fears, it would be tracked. 

83. Later that day, Murakami wrote to Chiat, “You[r] accusations and attitude are 

never going to be forgotten by me.”  Instead of contacting the family office investor or brokerage 

firm, Chiat continued to solicit new investments in the Canadian Fund, just as he had before, 

omitting to state his serious concerns.  In the next several days, Chiat coordinated a phone call 

between a prospective investor and Donville Kent, sent an email to the financial advisor for a 

Canadian Fund investor touting positive performance and attaching a recent newsletter, and 

arranged the details of a $50,000 additional investment in the Canadian Fund by an existing 

investor.  Chiat misled these investors by omitting to inform them of the facts suggesting a 

substantial risk of Murakami misappropriating their money. 

84. In 2016, after years of lying to investors, turning a blind eye to Murakami’s 

stealing, and violating his duties as an investment adviser and fiduciary, Chiat took advantage of 

Murakami’s misappropriation scheme for his personal benefit and to the detriment of Canadian 

Fund investors.  Chiat requested withdrawals from the Partners Fund on behalf of himself and 

relatives who were investors.  Murakami used money from the Canadian Fund to pay Chiat and 

two of Chiat’s relatives, purportedly as withdrawals of their invested capital and phony returns in 

the Partners Fund.  In reality, Chiat knew that the Partners Fund investments had been lost in 

2007 and 2008, but nevertheless requested and received a payment in April 2016 of $195,022 for 

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himself, and arranged for relatives to receive a total $690,069, all of which came from the 

Canadian Fund. 

CONCLUSION 

85. By misrepresenting fund performance and individual account balances to 

investors, soliciting new investments by misrepresenting the funds’ track records, and through 

Murakami’s misappropriating investor money for personal and business use, the defendants 

caused losses to investors of more than $11.2 million, all in violation of the laws of the United 

States as set forth below. 

FIRST CLAIM FOR RELIEF  
(Violation of Section 10(b) of the Exchange Act and Rule 10b-5)  

(All Defendants) 

86. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

87. The defendants, directly or indirectly, acting intentionally, knowingly or 

recklessly, by the use of means or instrumentalities of interstate commerce or of the mails, in 

connection with the purchase or sale of securities:  (a) have employed or are employing devices, 

schemes or artifices to defraud; (b) have made or are making untrue statements of material fact 

or have omitted or are omitting to state material facts necessary to make the statements made, in 

light of the circumstances under which they were made, not misleading; or (c) have engaged or 

are engaging in acts, practices, or courses of business which operate as a fraud or deceit upon 

certain persons. 

88. As a result, the defendants have violated and, unless enjoined, will continue to 

violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 

C.F.R. § 240.10b-5. 

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SECOND CLAIM FOR RELIEF  
(Violation of Section 17(a) of the Securities Act) 

(All Defendants) 

89. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

90. The defendants, directly or indirectly, acting intentionally, knowingly or 

recklessly, in the offer or sale of securities by the use of the means or instruments of 

transportation or communication in interstate commerce or by the use of the mails:  (a) have 

employed or are employing devices, schemes or artifices to defraud; (b) have obtained or are 

obtaining money or property by means of untrue statements of material fact or omissions to state 

material facts necessary in order to make the statements made, in light of the circumstances 

under which they were made, not misleading; or (c) have engaged or are engaging in 

transactions, practices or courses of business which operate as a fraud or deceit upon purchasers 

of the securities. 

91. As a result, the defendants have violated and, unless enjoined, will continue to 

violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). 

THIRD CLAIM FOR RELIEF  
(Violation of Sections 206(1) and 206(2) of the Advisers Act)  

(All Defendants) 
 

92. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

93. Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada Capital 

Management, LLC, each operated as an “investment adviser” within the meaning of Section 

202(a)(11) of the Advisers Act, 15 U.S.C. § 80b-2(a)(11).  Murakami and Chiat served in that 

capacity with respect to the Partners Fund, the Value Fund, and the Canadian Fund.  MC2 

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Capital Management, LLC, served in that capacity as to the Partners Fund and the Value Fund.  

MC2 Canada Capital Management served in that capacity for the Canadian Fund. 

94. As alleged herein, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 

Canada Capital Management, LLC, while acting as investment advisers, directly or indirectly, by 

use of the mails or means and instrumentalities of interstate commerce, knowingly, willfully, or 

recklessly: (a) employed or are employing devices, schemes, or artifices to defraud clients; and 

(b) engaged or are engaging in transactions, practices, and courses of business which operated 

and operate as a fraud or deceit upon clients. 

95. As a result, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada 

Capital Management, LLC, violated, and unless enjoined will continue to violate, Sections 

206(1) and 206(2) of the Advisers Act, 15 U.S.C. §§ 80b-6(1)-(2). 

FOURTH CLAIM FOR RELIEF  
(Violation of Sections 206(4) of the Advisers Act and Rule 206(4)-8 Thereunder)  

(All Defendants) 
 

96. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

97. Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada Capital 

Management, LLC, each operated as an “investment adviser” within the meaning of Section 

202(a)(11) of the Advisers Act, 15 U.S.C. § 80b-2(a)(11).  Murakami and Chiat served in that 

capacity with respect to the Partners Fund, the Value Fund, and the Canadian Fund.  MC2 

Capital Management, LLC, served in that capacity as to the Partners Fund and the Value Fund.  

MC2 Canada Capital Management served in that capacity for the Canadian Fund. 

98. The Partners Fund, Value Fund, and Canadian Fund were or are pooled 

investment vehicles within the meaning of Rule 206(4)-8(b), 17 C.F.R. § 275.206(4)-8(b). 

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99. As alleged herein, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 

Canada Capital Management, LLC, while acting as investment advisers to pooled investment 

vehicles, directly or indirectly, by use of the mails or means and instrumentalities of interstate 

commerce, engaged or are engaging in acts, practices, or courses of business which were 

fraudulent, deceptive, or manipulative.   

100. As a result, Murakami, Chiat, MC2 Capital Management, LLC, and MC2 Canada 

Capital Management, LLC, violated, and unless enjoined will continue to violate, Sections 

206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 15 C.F.R. § 

275.206(4)-8. 

FIFTH CLAIM FOR RELIEF  
(Aiding and Abetting Violations of Sections 206(1), (2) & (4)  

and Rule 206(4)-8 thereunder) 
(Murakami and Chiat) 

 
101. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

102. Murakami and Chiat knew or recklessly disregarded that MC2 Capital’s and MC2 

Canada’s conduct was improper and knowingly rendered to these entities substantial assistance 

in this conduct. 

103. As a result, Murakami and Chiat aided and abetted MC2 Capital’s and MC2 

Canada’s violations of Sections 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 

(2) & (4), and Rule 206(4)-8 thereunder, 15 C.F.R. § 275.206(4)-8.  

SIXTH CLAIM FOR RELIEF  
(Other Equitable Relief, Including Unjust Enrichment) 

(Relief Defendants) 
 

104. The Commission repeats and incorporates by reference the allegations in the 

preceding paragraphs of the Complaint as if set forth fully herein. 

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105. Section 21(d)(5) of the Exchange Act, 15 U.S.C. § 78u(d)(5), states: “In any 

action or proceeding brought or instituted by the Commission under any provision of the 

securities laws, the Commission may seek, and any Federal court may grant, any equitable relief 

that may be appropriate or necessary for the benefit of investors.” 

106. The relief defendants have received investors’ funds derived from the unlawful 

acts or practices of the defendants under circumstances dictating that, in equity and good 

conscience, they should not be allowed to retain such funds. 

107. As a result, the relief defendants are liable for unjust enrichment and should be 

required to return their ill-gotten gains, in an amount to be determined by the Court.  

 
PRAYER FOR RELIEF 

 
 WHEREFORE, the Commission requests that this Court: 

A. Enter a permanent injunction restraining the defendants, as well as their agents, 

servants, employees, attorneys, and other persons in active concert or participation with them, 

from directly or indirectly engaging in the conduct described above, or in conduct of similar 

purport and effect, in violation of: 

1. Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 

thereunder, 17 C.F.R. § 240.10b-5;  

2. Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a); and 

3. Sections 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), (2), 

& (4), and Rule 206(4)-8 thereunder, 17 C.F.R. § 275.204(4)-(8). 

B. Enter orders permanently enjoining Murakami and Chiat from directly or 

indirectly, including but not limited to, through any entity they own or control, participating in 

the issuance, purchase, offer, or sale of any security, provided, however, that such injunctions 

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shall not prevent Murakami or Chiat from purchasing or selling securities for their own personal 

accounts; 

C. Order the defendants to disgorge their ill-gotten gains, plus prejudgment interest; 

D. Order the relief defendants to disgorge all unjust enrichment and/or ill-gotten gain 

received from the defendants, plus prejudgment interest; 

E. Order the defendants to pay an appropriate civil monetary penalty pursuant to 

Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3); Section 20(d) of the Securities Act, 

15 U.S.C. § 77t(d); and Section 209(e)(1) of the Advisers Act, 15 U.S.C. § 80b-9(e);  

F. Retain jurisdiction over this action to implement and carry out the terms of all 

orders and decrees that may be entered; and 

G. Award such other and further relief as the Court deems just and proper. 

DEMAND FOR JURY TRIAL 

 The Commission demands a jury trial on all claims so triable. 

Dated:  May 22, 2017 

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Respectfully submitted: 
 
SECURITIES AND EXCHANGE 
COMMISSION 
 
By its attorneys, 

 
/s/ David M. Scheffler 
David M. Scheffler (Mass. Bar. No. 670324) 

       Enforcement Counsel 
Colin D. Forbes (NY No. 4664264 DC No. 992043)  

       Senior Enforcement Counsel 
Martin F. Healey (Mass. Bar No. 227550)  

Regional Trial Counsel 
      Celia D. Moore (Mass. Bar. No. 542136) 
       Assistant Regional Director 
      Boston Regional Office 
      33 Arch Street, 24th Floor 
      Boston, MA 02110 
      (617) 573-4574 (Forbes direct) 
      (617) 573-8810 (Scheffler direct) 
      (617) 573-4590 (fax) 
      [email protected] 
      [email protected]  
 

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