The Securities and Exchange
Commission filed a
civil suit alleging that a New York money manager,
Thomas Priore of ICP Capital, swindled buyers of bubble-era housing-related
The agency claims the firm socked away
tens of millions of dollars by “fraudulently managing investment products
tied to the mortgage markets as they came under pressure in 2007.
The SEC says that in 2006, ICP
began acting as the collateral manager on a series of CDOs named Triaxx, which
invested mostly in residential mortgage-backed securities. Some of the Triaxx
CDOs later ended up in the hands of the New York Fed, thanks to the
government’s 2008 bailout of AIG, which had insured some of the CDOs.
Priore and his firm lined their
pockets by directing the CDO investment trusts to buy assets at inflated
prices, the SEC contends.
“ICP and Priore repeatedly
caused the Triaxx CDOs to overpay for securities in order to make money for ICP
and protect other ICP clients from realizing losses,” the SEC said.
“The prices for such trades often exceeded market prices by substantial margins.”
The agency also alleges ICP caused
the CDO trusts to make improper, unapproved investments, and misrepresented its
actions to investors.
The SEC said the suit shows that
“collateral managers bear the same responsibilities to their clients as
every other investment adviser. When they violate their clients’ trust, we will
hold them accountable.”
ICP has been hit by some high-level defections over the past year, after a big expansion push. But Priore said
he’s confident his firm acted properly and intends to vigorously defend the SEC
“We’ll have our
day in court,” Priore said.