Jury Finds Former CEO of Newport News Investment Firm Guilty of Fraud
The former CEO of a Newport News-based
hedge fund has been convicted of fraud for inflating the value of an underlying asset
in order to solicit additional investments and pay himself more in fees.
According to court documents and evidence presented at trial, Jeffrey A.
Martinovich, of Norfolk, Virginia, served as CEO of MICG Investment LLC.
During his time there, he started three hedge funds, including MICG Venture
Strategies LLC. As hedge fund manager, Martinovich received management
and incentive fees based on the value of the funds’ underlying assets.
In 2007, acting on behalf of MICG, Jeffrey Martinovich purchased two million
shares of a privately traded solar energy company for the Venture Strategies
According to the U.S. Attorney’s Office for the Eastern District
“Because the solar company was not publicly traded, MICG was required
to seek an independent, external, valuation of the company’s worth
when calculating the management and incentive fees to be paid. In 2008,
under the guise of seeking an independent valuation, Martinovich and others
fraudulently inflated the value of the solar company to falsely indicate
an increase in the overall value of the hedge fund.”
Martinovich then used the inflated valuation to persuade new investors
to invest in Venture Strategies. He also used the fraudulent valuation
to calculate his management fees, thus paying himself more than he was
owed. When the solar company eventually filed for bankruptcy, the hedge
fund’s investors suffered significant losses.
“As a hedge fund manager, Martinovich promised investors that he
would act in their best interest in managing their hard earned money,”
said U.S. Attorney MacBride. “Instead, Martinovich acted solely
in his own self-interest and engaged in financial sleight of hand to fraudulently
maximize his management fees.”
At trial, a federal jury found Martinovich guilty of conspiracy to commit
mail and wire fraud, four counts of wire fraud, five counts of mail fraud,
and seven counts of unlawful monetary transactions. The maximum penalty
for each count is 20 years. His sentencing is scheduled for Aug. 7. For
additional information on the
Jeffrey Martinovich investment fraud case, click here.