SEC v. Ofer Abarbanel; Victor Chilelli; Income Collecting 1-3 Months T-Bills Mutual Fund; New York Alaska ETF Management LLC; Institutional Syndication LLC; North American Liquidity Resources LLC, et al., Southern District of New York (Feb. 27, 2026) — Complaint

UNITED STATES DISTRICT COURT
 SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

                                                              Plaintiff,
vs.

OFER ABARBANEL, VICTOR CHILELLI,
INCOME COLLECTING 1-3 MONTHS T-BILLS
MUTUAL FUND, and NEW YORK ALASKA ETF
MANAGEMENT LLC,

Defendants,

Civil Action No. 21-CV-5429 (RA)

ECF CASE

And

INSTITUTIONAL SYNDICATION LLC, NORTH
AMERICAN LIQUIDITY RESOURCES LLC,
INSTITUTIONAL SECURED CREDIT LLC,
GROWTH INCOME HOLDINGS LLC, CLO
MARKET NEUTRAL LLC, and GLOBAL EMEA
HOLDINGS LLC,

Relief Defendants.

AMENDED COMPLAINT

Plaintiff United States Securities and Exchange Commission (the “SEC” or

“Commission”) alleges as follows:

SUMMARY

1. From at least March 2017 through June 2021 (the “Relevant Period”), Defendants

(i) Ofer Abarbanel (“Abarbanel”), (ii) Victor Chilelli (“Chilelli”), and (iii) New York Alaska

ETF Management LLC (“NY Alaska”), the registered investment adviser that Abarbanel formed

and controlled, engaged in a fraudulent scheme to deceive and defraud investors in two mutual

funds that Abarbanel also formed and controlled:  a domestic fund, the State Funds – Enhanced

Ultra-Short Duration Mutual Fund (“State Funds”), registered in the United States; and an off-

2

shore fund, the Income Collecting 1-3 Months T-Bills Mutual Fund (“Income Collecting Fund”),

registered in the Cayman Islands (collectively, the “Funds”).

2. During the course of their investment scheme, Abarbanel, with the assistance of

NY Alaska and Chilelli, used the Funds to deplete, dissipate, and misappropriate investor assets

through a fraudulent course of conduct that included the creation of nominee shell companies,

the diversion of funds to these shell companies in unauthorized, uncollateralized loan

transactions that violated the terms set forth in the Funds’ public filings, prospectuses, and other

documents issued to investors, and the submission of false and misleading statements of material

facts to investors to disguise Defendants’ misconduct and further their scheme.

3. The investment scheme was composed of two overlapping phases led by

Abarbanel: a domestic phase, lasting from approximately March 2017 through February 2019,

and an offshore phase, lasting from approximately March 2018 through June 2021.  In both

domestic and offshore phases, the Defendants engaged in similar tactics to solicit and then

misuse investor funds, as described herein:  making false and misleading statements about the

Funds; using the Funds to enter into unauthorized, uncollateralized loan transactions with

counterparty shell companies that Defendants controlled; and then using misappropriated

investor funds to engage in unauthorized, often high-risk, trading activities to benefit themselves,

but not the Funds or their investors.

4. The Domestic Phase:  From approximately March 2017 through February 2019,

Abarbanel and NY Alaska perpetrated the fraudulent scheme through State Funds, the United

States-based mutual fund registered with the SEC that Abarbanel formed and controlled, with the

assistance of Chilelli.  Despite telling investors that State Funds was going to invest, and had

invested, in certain types of conservative, asset-backed securities transactions known as reverse

3

repurchase agreements (“Reverse Repos”)1 with independent financial institutions, Abarbanel

and NY Alaska instead caused State Funds to enter into unauthorized, uncollateralized loan

transactions with counterparty shell companies that Abarbanel and Chilelli created and

controlled.

5. The domestic phase lasted until early 2019, when certain investors became

suspicious and began to make inquiries into State Funds and its investment activities.  In

February 2019, in the face of such scrutiny, Abarbanel closed down State Funds, and transferred

operations to the Income Collecting Fund, the offshore fund registered in the Cayman Islands

that Abarbanel formed and controlled, with the assistance of Chilelli.

6. When closing down State Funds in early 2019, Abarbanel and NY Alaska forced

U.S. investors to redeem their shares and close out their investments, and moved non-U.S.

investors to the Income Collecting Fund.  Because there were insufficient assets available to

provide full redemptions to State Funds’ investors, Abarbanel had to commingle and

misappropriate new funds invested by Income Collecting Fund investors in order to pay off the

older State Funds investors.  Thus, although all investors in State Funds were fully redeemed, it

1     The Securities Industry and Financial Markets Association (“SIFMA”), describes repurchase
agreements, and the other side of these collateralized lending transaction, reverse repurchase agreements,
as follows:

A repurchase agreement [] is a financial transaction in which one party sells an asset to another
party with a promise to repurchase the asset at a pre-specified later date (a reverse repo is the
same transaction seen from the perspective of the security buyer).  … The repo market enables
market participants to provide collateralized loans to one another, and financial institutions
predominantly use repos to manage short-term fluctuations in cash holdings, rather than general
balance sheet funding. …  Repos offer cash providers collateralization (with additional margin
requirements in most cases) marked-to-market daily to ensure continuing protection.

See SIFMA, US Repo Market Fact Sheet (January 19, 2021) (available at https://www.sifma.org
/resources/research/us-repo-market-fact-sheet).

4

was at the expense of new investors in the Income Collecting Fund—a hallmark of a typical

Ponzi scheme.

7. The Offshore Phase:  Following the closure of State Funds, Abarbanel, Chilelli,

and the Income Collecting Fund continued to perpetrate their fraudulent course of conduct

through the Cayman Islands registered Income Collecting Fund, using the same tactics employed

during the domestic phase.  The Income Collecting Fund, in contrast to State Funds, was not

registered with the SEC and did not issue public filings with the SEC, and thus provided no

comparable disclosure about its operations to United States regulators.

8. Between approximately March 2019 and June 2021, Abarbanel and the Income

Collecting Fund entered into similar unauthorized, uncollateralized loan transactions with

nominee shell companies that Abarbanel and Chilelli controlled, while misrepresenting to

investors that the transactions were collateralized Reverse Repos entered into with independent

third parties.

9. Abarbanel, Chilelli, and the Income Collecting Fund continued the offshore phase

of the scheme through 2019, 2020, and into 2021.  In February 2021, the United States

Attorney’s Office for the Southern District of New York (USAO) approached Chilelli and

another individual associated with State Funds and the Income Collecting Fund, revealing a

criminal investigation into the Funds.  Around the same, the SEC issued subpoenas to Abarbanel

and others, in which the SEC disclosed its own investigation of Abarbanel and the Funds.

Confronted by these investigations, Abarbanel again forced investors to redeem, ultimately

paying back all investors in the Income Collecting Fund, with the exception of its largest group

of investors, Investor Group A.  At the time of the forced redemptions, Investor Group A had

approximately $106 million in assets invested with the Income Collecting Fund.

5

10. In May 2021, Investor Group A demanded a full redemption of its $106 million

outstanding investment in the Income Collecting Fund.  Due to Defendants’ misappropriation,

dissipation, and depletion of investor deposits, however, Abarbanel and the Income Collecting

Fund were without sufficient funds to redeem Investor Group A.  Instead of returning the

remaining funds to Investor Group A, Abarbanel and the Income Collecting Fund engaged in

pretextual actions, and made material misrepresentations to Investor Group A, to avoid Investor

Group A’s redemption demands, in violation of the redemption terms in the Income Collecting

Fund’s prospectus.

11. Abarbanel formed, controlled, and operated the Funds and NY Alaska.  Abarbanel

and NY Alaska are investment advisers, and as such, owed their client, State Funds, fiduciary

duties that encompassed a duty of loyalty to the Fund.

12. Abarbanel and Chilelli also formed, controlled, and/or operated two limited

liability companies (LLCs), Institutional Syndication LLC (“IS”), and North American Liquidity

Resources LLC (“NALR”) that they used, as counterparty shell companies, to enter into the

unauthorized, uncollateralized lending agreements with the Funds, as described herein.

13. Abarbanel and Chilelli also formed, controlled, and/or operated at least four other

LLCs, which they used to receive, hold, transfer, and misappropriate investors’ assets in

furtherance of the scheme:  Institutional Secured Credit LLC (“ISC”), Growth Income Holdings

LLC (“GIH”), CLO Market Neutral LLC (“CLO”), and Global EMEA Holdings LLC

(“EMEA”).

14. These LLCs formed, controlled, and/or operated by Abarbanel and Chilelli (IS,

NALR, ISC, GIH, CLO, and EMEA) are Relief Defendants that received ill-gotten proceeds of

the fraudulent scheme that are subject to disgorgement.

6

15. On June 18, 2021, to preserve the status quo and prevent further misappropriation,

dissipation, and depletion of assets, the SEC moved the Court by an emergency ex parte

application to freeze Income Collecting Fund assets and for other relief.  On that date, the Court

granted the SEC’s emergency application, freezing designated accounts containing Income

Collecting Fund assets.  On June 23, 2021, the USAO filed a two-count complaint (Securities

Fraud and Wire Fraud) against Abarbanel in the Southern District of New York, United States v.

Abarbanel, 1:21-mj-06425-UA (S.D.N.Y).

16. Summary of Fraudulent Conduct:  As detailed below, the fraudulent scheme

that Abarbanel organized and implemented involved a number of common deceptive acts, and

false and misleading statements of material fact, in both the domestic and offshore phases.

These include:

a. Making False Representations About the Funds and Funds Investments.

From at least March 2017 through May 2021, Abarbanel caused NY Alaska (for

State Funds) and the Income Collecting Fund to issue documents in public filings

(State Funds), and in prospectuses, website postings, fact statements, and other

communications with investors (both Funds) (collectively, “Funds Documents”),

making materially false and misleading representations about the Funds’

investments and investment strategies, the Reverse Repos they claimed to be

entering into, and the Funds’ holdings, earnings, and performance.  Given

Abarbanel’s control over the Funds, NY Alaska, the Relief Defendants, and the

transactions that these entities entered into, Abarbanel (and thus NY Alaska)

knew at the time that the statements were made, or was reckless in not knowing,

that they were materially false and misleading.

7

b. Soliciting and Receiving Investor Deposits.  From March 2017 through

February 2021, Defendants solicited, and investors deposited, in total, more than

$200 million into accounts held by the Funds, while contemporaneously,

Abarbanel, NY Alaska, and persons under Abarbanel’s direction and control,

issued materially false and misleading representations to investors in Funds

Documents and other communications.

c. Entering Into Unauthorized, Unsecured Lending Transactions With

Nominee Shell Companies.  As soon as investors deposited their assets into

Funds’ accounts, Abarbanel caused and directed NY Alaska (for State Funds) and

the Income Collecting Fund to enter into purported Reverse Repo loan

transactions with IS and NALR, the nominee shell companies that Abarbanel and

Chilelli, at Abarbanel’s direction, formed and controlled for this purpose.  These

loan transactions were not secured or collateralized; were not made in arms-length

transactions with independent, well-funded institutions; and were far removed

from the type of secured, collateralized Reverse Repos represented, promised, and

required in Funds Documents.

d. Transfer of Funds to Shell Companies.  Abarbanel then directed and caused NY

Alaska (for State Funds) and the Income Collecting Fund to transfer investor

deposits from the Funds’ bank accounts to bank accounts that Abarbanel and

Chilelli, at Abarbanel’s direction, set up in the names of IS and NALR.

e. Misappropriation of Funds Assets through Unauthorized Trading in Relief

Defendant Accounts.  Abarbanel and Chilelli, at Abarbanel’s direction, then

directed and caused IS and NALR to transfer investor funds to brokerage accounts

8

in the names of IS, NALR, and other nominee shell companies that Abarbanel and

Chilelli controlled, including Relief Defendants ISC, GIH, CLO, and EMEA.

From these brokerage accounts, Abarbanel and Chilelli, at Abarbanel’s direction,

then used investor assets to engage in tens of millions of dollars worth of

unauthorized securities trading, for Abarbanel’s own benefit, not for the benefit of

the Funds or their investors.  The trading was often on margin (using funds

borrowed from the brokerage firm), and often employed high-risk, volatile

options and futures trading strategies—far different from the conservative,

collateralized Reverse Repos described in Funds Documents.  In essence,

Abarbanel was using Funds investors’ assets as “house money” to speculate and

gamble at no risk to his own wealth.

f. Misappropriation and Depletion of Investor Funds:  Throughout the course of

the fraudulent scheme, Abarbanel, NY Alaska, and the Income Collecting Fund

misappropriated, dissipated, and depleted tens of millions of dollars worth of

investor assets through trading losses and other unauthorized diversions of funds.

 Trading losses:  Abarbanel’s high-risk trading strategies, in both the

domestic and offshore phases, were unsuccessful, leading to millions of dollars of

trading losses during the Relevant Period.  Abarbanel attempted to conceal these

losses from investors using various methods, including making false statements in

Funds Documents and other communications; repeatedly rolling over the

purported Reverse Repos entered into between the Funds and his nominee shell

companies; commingling assets; and eventually, by using new investors’ funds to

pay off old investors—a hallmark of a typical Ponzi scheme.

9

 Diversion of Funds:  During the Relevant Period, Abarbanel also directed

the Funds and Relief Defendants to make and effect other unauthorized transfers

of cash for his own benefit.  For example, in March 2020, Abarbanel caused ISC

to enter into sham lending and assignment agreements with the Income Collecting

Fund and NALR that improperly relieved Abarbanel of the obligation to repay

approximately $5.6 million he previously misappropriated and diverted to ISC

(and other entities, including EMEA) for his personal use.  On June 4, 2021,

Abarbanel directed and caused the Income Collecting Fund to transfer $64 million

of Investor Group A’s assets into a brokerage account from which no redemptions

could be drawn, and from which investor funds were subject to further

misappropriation, dissipation, and depletion.  On or about June 16, 2021, two

days before this action was commenced, Abarbanel directed and caused the

Income Collecting Fund to transfer $10 million of Investor Group A’s assets to a

brokerage account held by then-counsel to the Income Collecting Fund.

17. By engaging in the above-described misconduct, Defendants have violated, and

unless restrained and enjoined will continue to violate, the antifraud provisions of the Securities

Act of 1933 (“Securities Act”) [15 U.S.C. § 77 et seq.] and the Securities Exchange Act of 1934

(“Exchange Act”) [15 U.S.C. § 78 et seq.] and rules thereunder.  Abarbanel and NY Alaska have

further violated, and unless restrained and enjoined will continue to violate Sections 206(1), (2),

and (4) of the Investment Advisers Act of 1940 [15 U.S.C. § 80b-6(1), (2), and (4)] (“Advisers

Act”) and Rule 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940

(“Investment Company Act”) [15 U.S.C. § 80a-33(b)].

10

NATURE OF PROCEEDING AND RELIEF SOUGHT

18. The SEC brings this action pursuant to Section 20(d) of the Securities Act

[15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 209(b) of

the Advisers Act [15 U.S.C. § 80b-9(d)], and Sections 42(d) and (e) of the Investment Company

Act [15 U.S.C. §§ 80a-41(d) and 80a-41(e)] to seek an order enjoining the transactions, acts,

practices, and courses of business alleged in this Complaint, disgorgement of ill-gotten gains,

civil penalties, and such further relief that the Court may deem appropriate.

JURISDICTION AND VENUE

19. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and

22(a) of the Securities Act [15 U.S.C. §§ 77t(b),77t(d) and 77v(a)], Sections 21(d), 21(e), and 27

of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa], Sections 209(d), 209(e), and 214

of the Advisers Act [15 U.S.C. §§ 80b-9(d), 80b-9(e), 80b-14], Sections 42(d), 42(e), and 44 of

the Investment Company Act [15 U.S.C. §§ 80a-41(d), 80a-41(e), 80a-43], and 28 U.S.C.

§ 1331.

20. Venue in this District is proper pursuant to Section 22(a) of the Securities Act [15

U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].  Defendants transact

business in this District, and certain of the acts, practices, transactions, and courses of business

constituting the violations alleged in this Complaint occurred within this District, and were

effected, directly or indirectly, by making use of the means, instruments, or instrumentalities of

transportation or communication in interstate commerce, or of the mails, or the facilities of

national securities exchanges.

11

DEFENDANTS

21. Ofer Abarbanel, age 47, is a citizen of Israel, and has resided in Woodland Hills,

California since at least 2016.  Abarbanel carries an Israeli passport.  From at least October 2014

to the present, Abarbanel was the owner and sole control person for NY Alaska, a limited

liability company registered with the SEC as an investment adviser from approximately January

2015 to March 2019.  From his residence in California, Abarbanel also exercised full control

over the Funds, their operations and investments, and their dealings with investors.  Abarbanel

also controls the Relief Defendants.  He directed Chilelli to form IS and NALR, and is the named

manager of ISC, CLO, and GIH.  Abarbanel also controls bank accounts in at least Israel,

Singapore, and the Cook Islands—and likely the Cayman Islands and the Bahamas—in his name

and in the names of the Funds, ISC, T-Bill Securities, CLO, and EMEA.

22. Victor Chilelli, age 52, is a United States citizen residing in Lewes, Delaware.

Until 2020, Chilelli resided in Staten Island, New York.  Until November 2016, Chilelli was

Portfolio Manager for NY Alaska.  Until October 2017, Chilelli was Deputy Compliance Officer

for State Funds.  At all relevant times, Chilelli provided substantial assistance to Abarbanel, NY

Alaska, and the Income Collecting Fund in their execution of the fraudulent scheme.  In

particular, at Abarbanel’s direction, Chilelli participated in the component of the scheme

involving the unauthorized transfer of Funds assets to IS and NALR and the other Relief

Defendants.

23. Income Collecting 1-3 Months T-Bills Mutual Fund (the “Income Collecting

Fund”) is a mutual fund registered in the Cayman Islands (registration number CR-319456),

which consists of multiple share classes quoted on the Nasdaq market headquartered in New

York City and using Nasdaq symbols including “BILLX,” “GOVAX,” “GOVBX,” “GOVDX,”

12

“GOVTX,” and “USABX.”  As of May 21, 2021, all share classes in the Income Collecting Fund

other than GOVBX have been fully redeemed.  The Income Collecting Fund is not registered

with the SEC, and has or had directors on its Board of Trustees located in New York, Florida,

California, the Cayman Islands, and the British Virgin Islands.  The Income Collecting Fund’s

custodian is a bank account located in San Francisco (the “Income Collecting Fund Bank

Account”), its brokerage account is located in New York City, its investment adviser is located

in Nevada and/or the Bahamas, and its administrator is located in Ohio.  At relevant times, the

registered investment adviser for Investor Group A has been located in California and/or Utah,

and Abarbanel, Chilelli, and other Income Collecting Fund representatives had regular

communications with this investment adviser during the course of the scheme.  On or about June

21, 2021, shareholders and/or directors of the Income Collecting Fund caused the fund to enter

into voluntary liquidation in the Cayman Islands, appointed certain individuals to act as Joint

Voluntary Liquidators, and subsequently filed a petition to make the liquidation subject to the

supervision of the Grand Court of the Cayman Islands.  On or about October 11, 2021, the Grand

Court of the Cayman Islands declined to appoint the Joint Voluntary Liquidators as Joint Official

Liquidators to control the Fund, and instead appointed certain other individuals to act as Joint

Official Liquidators.

24. New York Alaska ETF Management LLC (“NY Alaska”) is a Nevada Limited

Liability Company domiciled and headquartered in Nevada, and was the designated investment

adviser to State Funds during the period that State Funds operated.  NY Alaska was registered

with the SEC as an investment adviser from January 2015 to March 2019, when it terminated its

registration.  Abarbanel was the sole owner of NY Alaska and served as the firm’s Chief

Executive Officer, Chief Financial Officer, and Chief Compliance Officer.

13

RELIEF DEFENDANTS

25. As alleged herein, the Relief Defendants received investor funds and/or ill-gotten

proceeds of the fraudulent scheme alleged herein, subject to disgorgement, for which they gave

no bona fide consideration and to which they have no legitimate claim.

26. Institutional Syndication LLC (IS) is a New Jersey Limited Liability Company

formed by Chilelli on October 31, 2017, domiciled and headquartered in New Jersey.  IS is a

shell company, formed, controlled, and operated by Abarbanel and Chilelli, at Abarbanel’s

direction, which they used to enter into unauthorized, uncollateralized lending transactions with

the Funds, in furtherance of their scheme.  From March 2019 through November 2020,

Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction,

transferred approximately $2,030,000 of funds invested by Investor Group A into IS accounts.

During the Relevant Period, IS received other assets that orginated from, and/or are traceable to,

investors’ deposits into the Funds.  IS has no legitimate claim to those funds.

27. North American Liquidity Resources LLC (NALR) is a Nevada limited

liability company, formed by Chilelli on October 17, 2017, domiciled and headquartered in

Nevada.  NALR is a shell company, formed, controlled, and operated by Abarbanel and Chilelli,

at Abarbanel’s direction, which they used to enter into unauthorized, uncollateralized lending

transactions with the Funds, in furtherance of their scheme.  From March 2019 through

November 2020, Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s

direction, transferred approximately $102,000,000 of funds invested by Investor Group A into

NALR accounts.  During the Relevant Period, NALR received other assets that orginated from,

and/or are traceable to, investors’ deposits into the Funds.  NALR has no legitimate claim to

those funds.

14

28. Institutional Secured Credit LLC (ISC) is a Nevada limited liability company

domiciled and headquartered in Nevada.  Abarbanel formed, controlled, and operated ISC.

Abarbanel, and Chilelli, at his direction, used ISC to hold and transfer proceeds of the fraudulent

scheme, including Investor Group A’s funds.  In particular, during the Relevant Period,

Abarbanel used ISC accounts to fund his own lifestyle, including paying his personal credit card

bills and other personal expenses.  From at least May 2019 through April 2021, Abarbanel, and

Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least

$627,000 worth of investors’ assets into ISC accounts.  During the Relevant Period, ISC received

other assets that orginated from, and/or are traceable to, investors’ deposits into the Funds.  ISC

has no legitimate claim to those funds.

29. Growth Income Holdings LLC (GIH) is a Nevada limited liability company

domiciled and headquartered in Nevada.  Chilelli is the sole owner of GIH.  Abarbanel and

Chilelli, at his direction, used GIH to hold and transfer proceeds of the fraudulent scheme,

including Investor Group A’s funds.  From at least April 2019 through January 2021, Abarbanel,

and Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least

$9.4 million worth of investors’ assets into GIH accounts.  During the Relevant Period, GIH

received other assets that orginated from, and/or are traceable to, investors’ deposits into the

Funds.  GIH has no legitimate claim to those funds.

30. CLO Market Neutral LLC (CLO) is a Nevada Limited Liability Company

domiciled and purportedly headquartered in Nevada.  Abarbanel, formed, controlled, and

operated CLO.  Abarbanel and Chilelli, at his direction, used CLO to hold and transfer proceeds

of the fraudulent scheme, including Investor Group A’s funds.  From at least May 2019 through

May 2021, Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s

15

direction, transferred at least $700,000 worth of investors’ assets into CLO accounts.  During the

Relevant Period, CLO received other assets that orginated from, and/or are traceable to,

investors’ deposits into the Funds.  CLO has no legitimate claim to those funds.

31. Global EMEA Holdings LLC (EMEA) is a Nevada Limited Liability Company

domiciled and purportedly headquartered in Nevada.  Abarbanel formed, controlled, and

operated EMEA.  From at least October 15, 2019 through August 18, 2020, Abarbanel, and

Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least $1.4

million of investors’ assets into EMEA accounts.  During the Relevant Period, EMEA received

other assets that orginated from, and/or are traceable to, investors’ deposits into the Funds.

EMEA has no legitimate claim to those funds.

RELATED ENTITIES

32.   State Funds – Enhanced Ultra-Short Duration Mutual Fund (“State

Funds”) was an open-end mutual fund registered with the SEC as an investment company

(ticker symbol STATX), organized as a Delaware statutory trust, and headquartered in Las

Vegas, Nevada.  Formerly known as “State Trust,” State Funds filed a registration statement on

Form N-1A that became effective on March 9, 2017 and filed an application for deregistration

due to liquidation on February 27, 2019.

FACTUAL ALLEGATIONS

I. The Domestic Phase—Using State Funds To Engage In Sham Reverse Repos With
Nominee Shell Companies that Abarbanel Controlled

A. Abarbanel and NY Alaska Form State Funds and Solicit Investors

33. On July 19, 2016, Abarbanel filed a registration statement with the SEC for State

16

Funds, an open-end mutual fund.2  Abarbanel signed as Trustee, President, CEO, CFO, and

CCO.  NY Alaska, controlled by Abarbanel, was the registered investment adviser for State

Funds.  State Funds’ amended registration statement became effective on March 9, 2017.

34. Abarbanel and NY Alaska then began soliciting investors in State Funds, and

were successful in doing so.  From March 2017 through February 2019, individual investors and

groups of investors invested more than $90 million with State Funds, receiving shares in State

Funds in exchange.  In its fiscal year 2018 Brochure, NY Alaska reported that State Funds had

$90.5 million in assets under management.

35. Abarbanel prepared and signed all public SEC filings for State Funds, including

the registration statements, the prospectus and proxy materials, and the annual, semi-annual, and

quarterly reports to shareholders (“Public Filings”).  When signatures of the trustees were

required, Abarbanel signed on the trustees’ behalf, pursuant to a power of attorney.

B. Abarbanel and NY Alaska Made Misrepresentations and Misleading
Omissions of Material Facts in State Funds’ Public Filings

36. After forming State Funds, from March 2017 through December 2018, Abarbanel

directed NY Alaska to issue and file a number of Public Filings with the SEC on behalf of State

Funds on the SEC’s public database, EDGAR,3 including prospectuses, quarterly and annual

statements, and other documents that described, among other things, State Funds’ management,

structure, investment strategy, risk profile, investments, holdings, assets, earnings, dividends, and

anticipated returns.

2  Open-end mutual funds typically do not limit the number of shares they can offer, and are bought and sold on
demand.  When an investor purchases shares in an open-end fund, the fund issues those shares, and when the
investor sells (redeems) shares, they are bought back by the fund.  (See https://www.finra.org/investors/learn-to-
invest/types-investments/investment-funds/mutual-funds).

3  EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, is the primary system for companies
and others submitting documents under the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust
Indenture Act of 1939, and the Investment Company Act of 1940.  (See https://www.sec.gov/edgar/about).

17

37. The Public Filings contained numerous false and misleading statements and

omissions of material fact about State Funds and its investments.  A list of these

misrepresentations is set forth in Appendix A.  Set forth below are representative examples:

38. On March 7, 2017, Abarbanel directed NY Alaska to issue a form N-1A/A

registration statement on behalf of State Funds, and published it on EDGAR.  In this registration

statement, State Funds described its “Principal Investment Strategies” as including:

In order to enhance income, the Fund intends to enter into securities lending, repurchase
agreement and/or reverse repurchase agreement transactions that provide the Fund with
income at either fixed or floating (variable) interest rates and fees. The Fund may lend its
portfolio of securities to broker/dealers, institutional investors, banks, mutual funds, and
insurance and/or reinsurance companies located in one of the member countries of The
Organization for Economic Co-operation and Development (“OECD”).

39. This representation was materially false and misleading.  As set forth further

herein, State Funds did not lend its portfolio of securities to anyone.  Further, the purported

Reverse Repo transactions State Funds entered into, as described herein, were with IS and

NALR, single-member shell LLCs with no operations or assets outside of their dealings with

State Funds; they were not broker/dealers, institutional investors, banks, mutual funds, or

insurance/reinsurance companies.  This description of fund counterparties also was rendered

materially false and misleading by the omission of any disclosure that State Funds’ manager and

control person, Abarbanel, also controlled IS and NALR, the counterparties to these transactions.

40. In the same registration statement, Abarbanel and NY Alaska further described

State Funds’ “Principal Investment Strategy” as:

Securities lending allows the Fund to retain ownership of the securities loaned and, at the
same time, earn additional income from fees paid by borrowers.  Loans will be made only
to parties who have been reviewed and deemed satisfactory by New York Alaska ETF
Management LLC, the Fund’s investment adviser (the “Adviser”), pursuant to guidelines
adopted by the Board of Trustees (the “Board” or the “Board of Trustees”) of State Trust
(the “Trust”) . . . .

18

41. This representation was rendered materially false and misleading through the

omission of material conflicts of interest.  First, Abarbanel and NY Alaska did not disclose that

IS and NALR, the counterparties to State Funds’ purported securities lending, were controlled by

Abarbanel—the control person for State Funds and NY Alaska.  Second, Abarbanel and NY

Alaska did not disclose that State Funds’ Board of Trustees was also controlled by Abarbanel,

who could not exercise independent judgment.

42. In the same registration statement, Abarbanel and NY Alaska further described

State Funds’ “Principal Investment Strategy” as:

Loans will be made only to parties who have been reviewed and deemed satisfactory . . .
and which provide collateral, which is either (i) 102% cash or (ii) 102%–115% U.S.
government securities.  The collateral is marked to market daily and, if the value of the
existing collateral decreases or the value of the securities lent increases, the borrower will
be required to post additional collateral.

43. This representation was materially false and misleading.  State Funds made loans

to IS and NALR without receiving any collateral in the form of cash or United States

government securities.

44. In the same registration statement, Abarbanel and NY Alaska further described

State Funds’ “Principal Investment Strategy” as:

Repurchase transactions involve the purchase of securities with an agreement to resell the
securities at an agreed-upon price, date and interest payment.  Reverse repurchase
transactions involve the sale of securities with an agreement to repurchase the securities
at an agreed-upon price, date and interest payment and have the characteristics of
borrowing.  Proceeds (collateral) received with respect to reverse repurchase agreements
include cash, U.S. Treasury securities or debt instruments secured by U.S. Treasury
securities.

45. This representation was materially false and misleading.  State Funds did not sell

securities to IS or NALR, and IS and NALR did not sell securities to State Funds.  State Funds

did not receive cash, Treasuries, or “debt instruments secured by Treasuries” as collateral for the

19

Reverse Repos.  Although State Funds received purported debt instruments from IS and NALR

(which Abarbanel falsely characterized as “secured notes” or “secured bonds”) these debt

instruments were unsecured promissory notes and did not constitute the promised liquid, secure

collateral.

46. In the same registration statement, Abarbanel and NY Alaska further described

State Funds’ “Principal Investment Strategy” as:  “The Fund will earmark or establish a

segregated account in which it will maintain cash, U.S. Treasury securities or other liquid

portfolio securities equal in value to its obligations in respect of reverse repurchase agreements.”

47. This representation was materially false and misleading.  Abarbanel and NY

Alaska did not cause State Funds to earmark or establish a segregated account to hold cash,

Treasuries, or other liquid portfolio securities equal in value to its obligations in respect of the

Reverse Repos.  No such collateral was ever received by State Funds or its custodian.

48. In the same registration statement, Abarbanel and NY Alaska described State

Funds’ Fund Distributions, and its Dividends and Distributions policies, as follows:

FUND DISTRIBUTIONS

The Fund distributes substantially all of its net investment income to shareholders in the
form of dividends.  The Fund intends to declare and distribute income dividends every
two weeks to shareholders of record.  In addition, the Fund distributes any net capital
gains it earns from the sale of portfolio securities to shareholders no less frequently than
annually.  Net short-term capital gains may be paid more frequently.  Dividend payments
are made through DTC participants and indirect participants to beneficial owners then of
record with proceeds received from the Fund.

* * * *

DIVIDENDS AND DISTRIBUTIONS

General Policies

Dividends from net investment income, if any, are declared and paid every two weeks by
the Fund. Distributions of net realized capital gains, if any, generally are declared and
paid once a year, but the Trust may make distributions on a more frequent basis for the

20

Fund to comply with the distribution requirements of the Internal Revenue Code, in all
events in a manner consistent with the provisions of the 1940 Act.  It is currently
expected that the Fund will distribute virtually all of its net income (interest less
expenses) monthly while capital gains distributions will generally occur annually in
December.

49. These representations were materially false and misleading.  Abarbanel and NY

Alaska did not cause State Funds to pay or distribute any dividends to investors from net

investment income, much less on a biweekly, monthly, or even yearly basis.

50. As detailed in Appendix A, Abarbanel and NY Alaska also caused State Funds to

make similar materially false and misleading representations about the fund’s investments,

assets, earnings, income, holdings, dividends, and distributions in other public filings, including

Forms N-CSR (filed on June 30, 2017, December 31, 2017, June 30, 2018), a Form N-CSR/A

(filed on December 31, 2018), a Form 485POS (filed on March 29, 2018), and Forms N-Q (filed

on March 31, 2018 and September 30, 2018).  Each of these filings was submitted to the SEC

and made available to the public on EDGAR.

51. Abarbanel and NY Alaska also directed and caused State Funds to make these

same types of materially false and misleading representations in Fact Sheets posted to State

Funds’ website between 2017 and 2019, and also emailed to investors.  For example, a “Fact

Sheet” that Abarbanel directed to be prepared and posted on State Funds’ website on or about

January 2, 2018—and that Abarbanel separately emailed to prospective investors—stated that, as

of January 2, 2018, State Funds’ “major holdings” were in U.S. Treasury Bills, amounting to

74.70% of the fund’s holdings, and in “Overnight Reverse Repo,” representing 23.94% of the

portfolio.

52. In addition, the “Fact Sheet” stated that State Funds:

a. “seeks to provide current income consistent with preservation of capital and daily

liquidity.”

b. has “major holdings [in] 3 Month US Treasuries”

c. “is permitted to enter into fixed/variable interest rate securities lending,

Repurchase & Reverse Repurchase agreements with banks, broker/dealers,

institutional investors, institutional investment manager(s), mutual funds,

insurance and/or reinsurance companies” in order “to increase income.”

d. engaged in lending transactions as follows:

Repurchase and Reverse Repurchase transactions – those are transactions
in which the fund purchases securities as either lender or borrower with
the agreement to sell them at a higher price at a specific future date.

Securities Lending transactions – Securities Lending transactions allow a
Fund to retain ownership of the securities loaned and, at the same time,
earn additional income from fees paid by borrowers.  (emphasis in
original)

e. “receives securities lending collateral which is limited to (i) 102% cash or

(ii) 102% - 115% US Government Securities.”

53. These representations were materially false and misleading.  As discussed herein,

State Funds did not enter into any arms-length secured or collateralized Reverse Repos with

independent third parties, and State Funds did not receive cash, “US Government Securities,” or

“excess collateral” to secure its lending activity.

54. Abarbanel and NY Alaska made additional misrepresentations and omissions of

material fact in Fact Sheets posted on State Funds’ website about interest payments.  For

example, in Fact Sheets published on the Fund’s website from 2017 to 2019, Abarbanel told

State Funds’ investors that the counterparties to the Reverse Repos would make significant

interest payments, which would enhance State Funds’ investment income.  In reality, however,

Abarbanel knew, or was reckless in not knowing, that IS and NALR did not have a source of

22

income from which to make such payments (absent a big win from his unauthorized risky trading

strategies, as outlined herein), and that such payments were not being made.

55. As described herein, given that Abarbanel (i) formed and had control over State

Funds’ accounts into which assets were deposited, and from which assets were withdrawn; (ii)

directed the formation of, and controlled the nominee shell companies, IS and NALR, that

entered into the unauthorized, uncollateralized loan agreements with State Funds; (iii) directed

the transfer of cash from State Funds to IS and NALR, and also to the other Relief Defendants;

and (iv) directed and controlled all trading and other activities of the nominee shell companies

IS, NALR, and the other Relief Defendants, Abarbanel and NY Alaska knew at the time that

they made all of the above misrepresentations, or were reckless in not knowing, that the

statements were false and misleading.

C. Abarbanel and NY Alaska Create Nominee Shell Counterparties IS and
NALR to Enter into Unauthorized Loan Agreements with State Funds

56. As described above, in State Funds’ Public Filings, Fact Sheets, and other

documents issued to investors, Abarbanel and NY Alaska represented that State Funds would

invest primarily in Treasuries, or in Reverse Repos collateralized by Treasuries, entered into with

independent, well-funded, third parties.  This did not happen.  Instead, Abarbanel and NY Alaska

directed and caused State Funds to enter into unsecured, uncollateralized loan transactions with

nominee shell entities that Abarbanel controlled.  And these unsecured, uncollateralized loan

transactions formed the core of their fraudulent scheme.

57. Although in early 2017, State Funds initially entered into a handful of Reverse

Repos with an independent counterparty, those agreements were short-lived.  In or about October

2017, frustrated that he lacked control over the independent counterparty to State Funds’ Reverse

Repos, Abarbanel terminated these Reverse Repos with the independent counterparty and

23

instructed Chilelli to form two LLCs that Abarbanel could control going forward for the purpose

of entering into purported Reverse Repos with State Funds.

58. In December 2017, following Abarbanel’s directive, Chilelli formed IS and

NALR, which immediately assumed all of the prior Reverse Repos from the independent

counterparty.

59. From that point forward, Abarbanel and NY Alaska did not invest State Funds’

investors’ assets in Treasuries or Reverse Repos, as they represented and promised.  Instead,

from late 2017 until early 2019, Abarbanel and NY Alaska transferred investors’ funds to

accounts in the names of IS and NALR, in exchange for unsecured, uncollateralized loan

agreements.  The loan agreements were memorialized in the form of boilerplate Global Master

Repurchase Agreements (“GMRAs”) executed by State Funds and the particular counterparty to

the transaction, IS or NALR, that Abarbanel caused and directed to be updated for each

particular loan transaction.  These loan agreements were purportedly secured by a form of

promissory note that Abarbanel referred to in correspondence with State Fund’s custodian and

counterparties as “secured bonds” or “secured notes,” although they did not function as either

secured bonds or secured notes.  They were not collateralized or secured, as indicated in the

notes, and did not provide the type of liquid, secure collateral promised and represented in the

Public Filings and Fact Sheets.

60. Although these unsecured, uncollateralized loan agreements memorialized by the

GMRAs purported to be Reverse Repos of the type Abarbanel and NY Alaska represented in

State Funds’ Public Filings, in fact, they were in no meaningful way similar to the promised

secured, collateralized Reverse Repo transactions.  They differed in at least three fundamental

ways:

24

61. First, the counterparties IS and NALR were not well-funded, independent third

parties; they were nominee shell companies controlled by Abarbanel and Chilelli (at Abarbanel’s

direction).  State Funds’ Public Filings disclosed that the fund “may enter into repurchase

agreements with broker/dealers, institutional investors, institutional investment managers, banks,

mutual funds, and insurance and/or reinsurance companies.”  Counterparties IS and NALR did

not fall into any of these categories.  IS and NALR were single-member LLCs formed and

controlled by Abarbanel and Chilelli with no capitalization, no source of funds other than

investors’ cash transferred from State Funds, and no other business purpose or activities except

to be counterparties to State Funds in the unsecured, uncollateralized loan transactions described

above, and then vehicles for the receipt and transfer of investor cash in other unauthorized

transactions.

62. Second, no Reverse Repos, as described in State Funds’ Public Filings, were

executed.  The Public Filings described the Reverse Repos as follows:  “[T]he Fund enters into a

contract with a counterparty under which (i) the Fund sells securities for cash or cash equivalents

to the counterparty, and (ii) the Fund agrees to repurchase the securities at an agreed-upon price,

date, and interest payment.”  This never happened.  Although State Funds’ schedule of

investments included a number of purported Reverse Repos, State Funds never sold or

transferred securities to any counterparty.  Nor did any counterparty ever send cash or cash

equivalents to State Funds or its custodian.  Rather, State Funds sent cash to IS and NALR, and

got nothing in return except the unsecured, uncollateralized promissory notes described above.

63. Third, no collateral was exchanged.  State Funds’ public filings stated that loans

would only be made to parties who “provide collateral, which is either (i) 102% cash or (ii) 102-

115% U.S. government securities.”  Likewise, the schedules of investments filed by State Funds

25

represented that collateral was 102-103% of the amount of the principal for each purported

Reverse Repo listed, and described the collateral by reference to specific U.S. Treasury Bills and

their maturation dates.  This never happened.  In reality, there was no collateral exchanged for

the cash payments that State Funds sent to IS and NALR, and State Funds did not receive cash or

Treasuries from IS or NALR in exchange for the cash payments, only unsecured promissory

notes of the type described above.

64. Abarbanel and NY Alaska’s representations in the Public Filings and Fact Sheets

concerning secure, liquid collateralization were critical to the investment decisions of investors

(including Investor Group A, as described below).  A reasonable investor reading the Public

Filings and Fact Sheets would expect, believe, and understand that the transactions entered into

by State Funds would be conservative and low-risk because they were secured by unencumbered

Treasuries in State Funds’ possession, which could be easily liquidated in the event of default.

65. Investors were deceived and misled by way of the lack of collateral transferred

back to State Funds in exchange for the tens of millions worth of investors’ deposits that

Abarbanel and NY Alaska caused to flow to nominee shell companies IS, NALR, and the other

Relief  Defendants.

D. Abarbanel Used Investor Funds to Engage in Unauthorized High-Risk
Trading In The Relief Defendants’ Accounts

66. After (i) causing State Funds to enter into the unauthorized, uncollateralized loan

transactions with IS and NALR, purporting to be Reverse Repos; and (ii) transferring State

Funds’ investor deposits into IS and NALR accounts that he controlled, Abarbanel now had

access to tens of millions of dollars of investor cash with which he could unlawfully speculate

and gamble, as he saw fit, at no risk to his own personal wealth.

67. Between March 2017 and February 2019, Abarbanel and Chilelli, under

26

Abarbanel’s direction, directed and caused IS and NALR to engage in numerous unauthorized,

often high-risk securities transactions using State Funds’ investors’ deposits as capital.  These

unauthorized trading processes generally entailed the following steps:

68. First, Abarbanel and Chilelli, under his direction, used State Funds’ investor

assets to establish and fund brokerage accounts in the names of IS and NALR.  The dollars

transferred to IS and NALR accounts purported to correspond to the amount of funds that State

Funds “loaned” to IS and NALR as part of the unsecured, uncollateralized loan transactions

described herein.

69. Now, having millions of dollars of State Funds’ investors’ cash at his disposal,

Abarbanel, and Chilelli, under his direction, used the cash to engage in tens of millions of dollars

worth of unauthorized securities transactions in the name of, and for the benefit of Abarbanel,

Chilelli, IS, and/or NALR, not State Funds or its investors.  These unauthorized securities

transactions often were on margin (using funds borrowed from the brokerage firm), transacted in

margin accounts, and often employed high-risk options and futures strategies.  These volatile,

high-risk securities transactions, directed and controlled by Abarbanel, were contrary to the

conservative, secure transactions that Abarbanel and NY Alaska described and promised that

State Funds would enter into in the Public Filings and Fact Sheets, as described above.

70. In essence, Abarbanel’s plan (in both the Domestic Phase and Offshore Phase)

involved using investors’ assets as “house money” with which to speculate and gamble.  If

Abarbanel “won” his bets using investor funds, and his high-risk trades were successful, he could

cover the interest owed in the underlying loan transactions that State Funds entered into with IS

and NALR, with potentially extra for himself to spare; and if he “lost,” which was the case, as

described herein, he could (and did) try to hide his losses by various methods, including by

27

rolling over the loan agreements, buying time until his high-risk, high-reward trades might

possibly cover accrued losses.  Eventually, when time ran out, Abarbanel resorted to the age-old

Ponzi-scheme-like method of hiding his losses by using new investor deposits to pay off old

investors who sought to redeem.

71. In addition to these high-risk trades made in IS and NALR accounts, Abarbanel

and Chilelli, at Abarbanel’s direction, also transferred investor funds from IS and NALR

accounts to different bank and brokerage accounts in the names of the other Relief Defendant

LLCs, as well as other entities that Abarbanel and Chilelli formed, controlled, and/or operated.

72. From these other nominee accounts, Abarbanel and Chilelli, at Abarbanel’s

direction, again entered into similar high-risk securities transactions, again, often on margin, and

again, often employing high-risk options and futures strategies for the benefit of Abarbanel,

Chilelli, and the Relief Defendants, not State Funds or its investors.

73. In purported documentation of the Reverse Repos, Abarbanel and Chilelli, at

Abarbanel’s direction, directed IS and NALR to send original, signed hard copies of the updated

unsecured promissory notes, described above, to State Funds’ custodian, instructing the

custodian to preserve the agreements.  As described above, these unsecured promissory notes

were the only purported collateral provided to State Funds in exchange for the cash payments

transferred to IS and NALR.

74. On multiple occasions, including in emails dated October 2018 through February

2019, Abarbanel directly or indirectly instructed State Funds’ custodian to destroy particular

promissory notes, asserting that they had been repaid or altered.  Abarbanel’s representations

concerning repayment of the promissory notes were false; none of the promissory notes had been

repaid.  Moreover, Abarbanel’s directives to destroy any critical business records such as the

28

promissory notes were improper, and were done only to further and conceal his fraudulent

scheme.

75. In the end, Abarbanel’s hopes that his high-risk trading strategies would yield

sufficient profits, from which IS and NALR could make promised interest payments, did not

come to fruition.  Instead, his trading in IS’s and NALR’s accounts, using investor assets,

generated millions of dollars in losses.  For example, in calendar year 2018, tax records for IS

and NALR indicate that they lost nearly $7 million from unsuccessful trading.

76. Because of the significant losses incurred as a result of Abarbanel’s high-risk

trading, because IS and NALR did not have an independent source of income, and because

Abarbanel siphoned money out of these accounts for his own uses, IS and NALR were unable to

repay the unsecured loans made from State Funds.  Instead, Abarbanel and NY Alaska caused

the Reverse Repos to be repeatedly rolled over, with new expiration dates added, and IS and

NALR made regular interest payments from the amounts loaned to them by State Funds,

concealing from investors the inability of IS and NALR to repay the unsecured promissory notes

exchanged for the cash payments from State Funds.

77. In December 2018, a Connecticut-based investor contacted Abarbanel to discuss

the investor’s questions and concerns about the counterparties and Reverse Repos.  Abarbanel

attempted to allay the investor’s concerns, but—after conducting additional due diligence

concerning State Funds, IS and NALR, and the collateral (or lack thereof) provided by these

counterparties—the investor ultimately requested a full redemption of its investment.

78. Abarbanel had already established the Income Collecting Fund in the Cayman

Islands at this time.  Shortly after his conversations with the Connecticut-based investor,

Abarbanel and NY Alaska encouraged all of State Funds’ non-U.S. investors to move their

29

investments to the Income Collecting Fund.  Abarbanel and NY Alaska then forcibly redeemed

all remaining U.S. investors in State Funds, and, in February 2019, filed an application with the

SEC to de-register State Funds.

79. At the time Abarbanel forcibly redeemed State Funds’ U.S. investors and moved

its non-U.S. investors to the Income Collecting Fund, IS and NALR did not have sufficient funds

to repay the outstanding Reverse Repos with State Funds.  Abarbanel directed and caused IS and

NALR to enter into new agreements with the Income Collecting Fund.  Abarbanel then used the

funds received by IS and NALR from the Income Collecting Fund to repay State Funds’ U.S.

investors in the forced redemptions.  Because Abarbanel used funds invested by the Income

Collecting Fund’s investors to redeem State Funds’ investors, he ultimately left the Income

Collecting Fund without sufficient funds to redeem its own investors (namely, Investor Group

A), as further described below in Section III.

II. The Offshore Phase—Using the Income Collecting Fund To Engage In Sham
Reverse Repos With Nominee Shell Companies that Abarbanel Controlled

A. Abarbanel Founded and Used the Income Collecting Fund to Engage in

Unauthorized, Uncollateralized Loan Agreements

80. In or around March 2018, Abarbanel took steps to register the Income Collecting

Fund in the Cayman Islands by renaming an exempted company previously incorporated under

the name “US Bonds Mutual Fund.”

81. Abarbanel arranged for nominee personnel in the Bahamas and British Virgin

Islands to serve as directors of the Income Collecting Fund, leaving Abarbanel free to control the

activities of the Income Collecting Fund without meaningful hindrance or oversight.

82. Abarbanel controlled all aspects of the Income Collecting Fund.  A March 2020

letter signed by the fund’s Director and Chairman describes a motion by the Income Collecting

30

Fund’s Board “authorizing Mr. Ofer Abarbanel to represent the fund in all matters and that

Interactive Brokers LLC is allowed to disclos[e] all fund information to Mr. Ofer Abarbanel.”

83. Chilelli provided substantial assistance to Abarbanel with respect to the offshore

phase of the scheme.  In particular, Chilelli oversaw the transfer of Income Collecting Fund

assets to counterparties, IS and NALR, which Chilelli, at Abarbanel’s direction, formed,

controlled, and operated.

B. Abarbanel and the Income Collecting Fund Made Materially False and
Misleading Statements and Omissions in the Income Collecting Fund’s
Prospectus

84. In approximately January 2019, Abarbanel created a prospectus on behalf of the

Income Collecting Fund, and issued and/or made it available to investors on the fund’s website

(www.govbxfund.com).

85. Investor Group A accessed and reviewed the Income Collecting Fund’s

prospectus.

86. Between February 2019 and at least August 2020, on at least 9 occasions

(including February, March, April, May, June, and July of 2019, and April, July, and August of

2020), Abarbanel and the Income Collecting Fund issued updates to the prospectus that

contained minor modifications, and posted the prospectus on the fund website.

87. As with State Funds’ public filings set forth above, the Income Collecting Fund’s

prospectus described the fund’s structure, investment strategy, investments, anticipated returns,

and methods for purchasing and redeeming shares.  The prospectus described the Income

Collecting Fund’s investment objective as “seek[ing] current income consistent with preservation

of capital and daily liquidity.”

88. As Abarbanel and the Income Collecting Fund knew at the time, or were reckless

31

in not knowing, this representation was materially false and misleading.  The transfer of funds to

IS and NALR that they directed and controlled, in uncollateralized, unsecured lending

transactions, was not consistent with the preservation of capital or daily liquidity.

89. As with State Funds’ Public Filings, The Income Collecting Fund’s prospectus

represented that it would invest primarily in Treasuries.  In the description of the Income

Collecting Fund’s “Principal Investment Strategies,” the prospectus disclosed, in relevant part,

that “the Fund invests its net assets primarily (exclusive of collateral with respect to securities

lending and reverse repurchase agreement transactions) in U.S. Treasury securities, which

include bills, notes, and bonds issued by the U.S. Treasury.”  As Abarbanel and the Income

Collecting Fund knew at the time, or were reckless in not knowing, this representation was

materially false and misleading.  The Income Collecting Fund did not invest primarily in

Treasuries.  In fact, as reported in a year-end 2019 fund report, the Income Collecting Fund’s

investments comprised only 1 percent Treasuries.

90. Similar to State Funds’ Public Filings, the Income Collecting Fund’s prospectus

also stated that it might enter into Reverse Repos.  As stated in the prospectus:  “In order to

enhance income, the Fund intends to enter into securities lending, repurchase agreements and/or

reverse repurchase agreement transactions that provide the Fund with income at either fixed or

floating (variable) interest rates and fees.”  As Abarbanel and the Income Collecting Fund knew

at the time, or were reckless in not knowing, this representation was materially false and

misleading.  The Income Collecting Fund did not enter into Reverse Repos with counterparties

that provided income at fixed or floating interest rates.

91. The Income Collecting Fund’s prospectus further stated that the fund “may enter

into repurchase agreements and/or reverse repurchase agreements with counterparties such as:

32

broker/dealers, institutional investors, institutional investment manager(s), banks, mutual funds,

and insurance and/or reinsurance companies.”  Abarbanel and the Income Collecting Fund knew

at the time, or were reckless in not knowing, that this statement was materially false and

misleading.  The counterparties to the purported Reverse Repos into which the Income

Collecting Fund entered were not independent, well-funded, established institutions such as

those listed, but, instead, were single-member shell LLCs, formed, controlled, and operated by

Abarbanel and Chilelli, with no assets, operations, or business purpose other than to facilitate the

unauthorized investment, transfer and misappropriation of investor funds as described herein.

92. The Income Collecting Fund prospectus further represented that “Reverse

repurchase transactions involve the sale of securities with an agreement to repurchase the

securities at an agreed upon price, date and interest payment,” and that the “proceeds (collateral)

secured to the Fund with respect to reverse repurchase agreements will include either (1) 100%

units of mutual fund symbols:  STATX or of this Fund or (2) 102%–115% U.S. Treasury

securities.”  Abarbanel and the Income Collecting Fund knew at the time, or were reckless in not

knowing, that this statement was materially false and misleading, because, in practice, the

purported Reverse Repos with IS and NALR involved neither the lending nor sale of securities

with an agreement to repurchase the securities at an agreed upon price, date and interest

payment, nor collateral in the form of mutual fund shares or Treasuries.

93. Rather, between March 2019 and February 2021, each transaction involved

sending Investor Group A’s funds to IS or NALR, as directed by Abarbanel, Chilelli, and the

Income Collecting Fund.  In exchange, the Income Collecting Fund and each counterparty

executed a boilerplate “Master Securities Loan Agreement,” which the Income Collecting Fund

sent to the Income Collecting Fund’s custodian.  This exchange of investor funds for unsecured,

33

uncollateralized loan agreements did not satisfy the prospectus’ requirement to supply collateral

in the form of Treasuries or other specified collateral.

94. In short, as Abarbanel and the Income Collecting Fund knew at the time, or were

reckless in not knowing, the representations in the prospectus were materially false and

misleading statements, because:  (a) the MSLA was not a repurchase agreement or reverse

repurchase agreement as described in the prospectus, or as a reasonable investor would

understand, (b) the prospectus and other documents issued by Abarbanel and the Income

Collecting Fund did not correctly describe the actual related-party transactions that Abarbanel,

Chilelli, and the Income Collecting Fund orchestrated between the Income Collecting Fund and

counterparties IS and NALR—in that the Income Collecting Fund neither bought nor sold

securities with an agreement to repurchase the securities at an agreed-upon price, date, and

interest payment; and the Fund never received collateral in the form of the specified mutual fund

symbols or Treasuries.  In addition, IS and NALR were single-member shell LLCs with no

significant assets or business operations, not “broker/dealers, institutional investors, institutional

investment manager(s), banks, mutual funds, and insurance and/or reinsurance companies.”

C. Abarbanel and the Income Collecting Fund Made Misrepresentations and
Misleading Omissions of Material Facts in the Income Collecting Fund’s Fact
Sheets

95. In addition to the prospectus, Abarbanel also prepared a “Fact Sheet” for the

Income Collecting Fund, which was updated at Abarbanel’s direction on a monthly basis

throughout 2019 (March-December), 2020 (January-December), and early 2021 (January,

February), and to post to the Income Collecting Fund’s website, along with the prospectus.

96. The Fact Sheet included materially false and misleading representations and

omissions concerning the Income Collecting Fund’s investment strategy and holdings, similar to

34

those in the prospectus.

97. For example, the Fact Sheet stated that the Income Collecting Fund:

a. “seeks to provide current income consistent with preservation of capital and daily

liquidity.”

b. has “major holdings [in] 3 Month US Treasuries”

c. “is permitted to enter into fixed/variable interest rate securities lending,

Repurchase & Reverse Repurchase agreements with banks, broker/dealers,

institutional investors, institutional investment manager(s), mutual funds,

insurance and/or reinsurance companies” in order “to increase income.”

d. engaged in lending transactions as follows:

Repurchase and Reverse Repurchase transactions – those are transactions
in which the fund purchases securities as either lender or borrower with
the agreement to sell them at a higher price at a specific future date.

Securities Lending transactions – Securities Lending transactions allow a
Fund to retain ownership of the securities loaned and, at the same time,
earn additional income from fees paid by borrowers.  (emphasis in
original)

98. In addition, as updated throughout 2019, 2020, and early 2021, the Fact Sheet

variously described the collateral received by the Income Collecting Fund as comprised of

mutual fund shares, “102%–115%” Treasury securities, and “100% Cash.”  The Fact Sheet

consistently emphasized that the Income Collecting Fund’s collateral was “marked to market

daily” to “ensure[] that the fund will always have excess collateral (over-collateralization) to

secure its activity.”

99. As Abarbanel and the Income Collecting Fund knew at the time, or were reckless

in not knowing, these statements in the Fact Sheet were materially false and misleading:  The

Income Collecting Fund’s “major holdings” were not in Treasuries; the Income Collecting Fund

35

did not enter into any arms-length secured or collateralized Reverse Repos with independent

third parties, as represented; the Income Collecting Fund did not receive collateral consisting of

mutual fund shares, “102%–115%” Treasury securities, or “100% Cash;” and the Income

Collecting Fund did not have “excess collateral” to secure its lending activity.

D. Abarbanel, Chilelli, and the Income Collecting Fund Used IS and NALR to
Misappropriate, Deplete, and Dissipate Investor Group A’s Assets

100. Investor Group A was the Income Collecting Fund’s largest investor.  From

March 2019 through February 2021, Investor Group A invested approximately $191 million in

the Income Collecting Fund, by depositing those funds into the Income Collecting Fund Bank

Account.  As of June 2021, following its prior redemptions of approximately $85 million,

Investor Group A had approximately $106 million remaining on deposit with the Income

Collecting Fund.

101. Abarbanel and the Income Collecting Fund never invested Investor Group A’s

funds as promised and represented, as detailed above.

102. Instead, following Investor Group A’s investment, Abarbanel and the Income

Collecting Fund immediately transferred at least $104 million worth of Investor Group A’s

deposits into IS and NALR, which Abarbanel and Chilelli controlled, in exchange for unsecured

and uncollateralized loan agreements (the Master Securities Loan Agreement) executed by IS

and NALR.

103. The IS and NALR Master Securities Loan Agreement transactions in no

meaningful way supplied the Income Collecting Fund (and Investment Group A) with the secure,

collateralized investments promised by the prospectus.

104. IS and NALR, at Abarbanel’s and Chilelli’s direction, then transferred or used the

investor funds for their own benefit.  Between March 2019 and February 2021, Abarbanel and

36

Chilelli (at Abarbanel’s direction) used Investor Group A’s assets transferred from the Income

Collecting Fund to establish brokerage accounts in the names of IS and NALR.  In the same

manner as Abarbanel orchestrated in the Domestic Phase, using State Funds’ investors assets,

Abarbanel and the Income Collecting Fund then repeatedly used Investor Group A’s funds to

engage in various securities transactions for their own benefit, and not for the benefit of the

Income Collecting Fund or its investors.  As in the Domestic Phase, these securities transactions

were often high-risk and volatile, often on margin, and often employed volatile, high-risk

futures-options trading strategies similar to those Abarbanel employed in the Domestic Phase.

105. For example, during the time period referred to above, Abarbanel and Chilelli, at

Abarbanel’s direction, purchased securities in the brokerage accounts of IS and NALR, often on

margin.  Abarbanel and Chilelli, at Abarbanel’s direction, also transferred funds in these

accounts to different bank and brokerage accounts that they also controlled, in the name of other

entities, including the Relief Defendants.  In these other accounts, IS and NALR, again acting

under the direction and control of Abarbanel and Chilelli, would repeat the process, purchasing

additional securities and other investments.

106. The following are examples of Defendants’ misappropriation, depletion, and

dissipation of Investor Group A’s assets:

a. On March 5, 2019, Investor Group A wired $20,500,000 into the Income

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused

the Income Collecting Fund to transfer $20,500,000 to NALR’s bank account.

On or about that same day, Abarbanel and Chilelli directed and caused NALR to

execute a loan agreement with the Income Collecting Fund (the Master Loan

Servicing Agreement), but did not return any Treasuries or any other form of the

37

required collateral to the Income Collecting Fund.  On that same day, Abarbanel

and Chilelli directed and caused the transfer of $20,500,000 from NALR’s bank

account to NALR’s brokerage account.  From there, Abarbanel and Chilelli

directed and caused NALR to move $20,500,000 to an affiliated NALR brokerage

account, and to purchase Treasury securities in approximately that amount.  Those

securities were held by, and for the benefit of NALR, Abarbanel, and Chilelli, and

not for the benefit of the Income Collecting Fund or Investor Group A.  Thus,

they were not pledged, transferred, or assigned to the Income Collecting Fund,

and were not collateral to the underlying unsecured loan agreement between the

Fund and NALR.

b. On June 27, 2019, Investor Group A wired $16,000,000 into the Income

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused

the Fund to transfer $16,000,000 to NALR’s bank account.  On or about that same

day, Abarbanel and Chilelli directed and caused NALR to re-execute the Master

Loan Services Agreement with the Income Collecting Fund to reflect the

additional amount, but did not return any Treasuries or any other form of the

required collateral to the Fund.  On that same day, Abarbanel and Chilelli directed

and caused the transfer of $16,000,000 from NALR’s bank account to NALR’s

brokerage account.  From there, Abarbanel and Chilelli directed and caused

NALR to move $15,998,000 to an affiliated NALR brokerage account and to

purchase Treasury securities in approximately that amount.  Again, these

securities were not transferred, pledged, or assigned to the Fund for the benefit of

the Income Collecting Fund or Investor Group A, and were not collateral to the

38

underlying unsecured loan agreement between the Income Collecting Fund and

NALR.

c. On September 4, 2020, Investor Group A wired $14,000,000 into the Income

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused

the Income Collecting Fund to transfer $14,000,000 to NALR’s bank account.

On or about that same day, Abarbanel and Chilelli directed and caused NALR to

re-execute the Master Loan Services Agreement with the Income Collecting Fund

to reflect the additional amount, but did not return any Treasuries or any other

form of the required collateral to the Income Collecting Fund.  On that same day,

Abarbanel and Chilelli directed and caused the transfer of $13,990,000 from

NALR’s bank account to NALR’s brokerage account.  From there, Abarbanel and

Chilelli directed and caused NALR to move $13,990,000 to an affiliated NALR

brokerage account and to purchase Treasury securities in approximately that

amount.  Again, these securities were not transferred, pledged, or assigned to the

Income Collecting Fund for the benefit of the Income Collecting Fund or Investor

Group A, and were not collateral to the underlying unsecured loan agreement

between the Income Collecting Fund and NALR.

107. In the transactions detailed above, and the other transactions described herein

involving assets invested in the Income Collecting Fund by Investment Group A,  Abarbanel,

Chilelli, and the Income Collecting Fund, acting knowingly or recklessly—by and through

counterparties IS and NALR that Abarbanel and Chilelli formed, controlled, and operated—

misappropriated, dissipated, and depleted Investor Group A’s funds by:  (i) failing to invest

funds in Reverse Repos as required by the prospectus; (ii) failing to provide the collateral

39

required by the prospectus to secure Investment Group A’s investments in the Income Collecting

Fund; and (iii) placing Investor Group A’s funds in IS and NALR’s accounts and using the funds

for Defendants’ benefit.

108. In addition, Abarbanel personally misappropriated millions of dollars of investor

funds, including on or about March 16, 2020 by causing ISC to transfer $5.6 million to NALR

and then to his own personal accounts.

III. Abarbanel and the Income Collecting Fund’s Pretextual Response to Investor
Group A’s Redemption Demands

A. Abarbanel and the Income Collecting Fund Refused and Failed to Honor
Investor Group A’s Redemption Demands

109. In February 2021, Abarbanel became aware of the SEC’s investigation and

parallel investigations by the U.S. Attorney’s Office for the Southern District of New York and

the U.S. Office of the Postal Inspector.

110. When Abarbanel learned of the SEC’s investigation, he took immediate action to

limit the number of investors in the Income Collecting Fund by forcibly redeeming all of the

investors in the Income Collecting Fund, except for its largest investor, Investor Group A.

111. Based on financial records and other documents, Abarbanel and a close family

member may have been among the investors in the Income Collecting Fund who were redeemed.

112. Abarbanel did not inform Investor Group A of the SEC’s investigation or offer to

redeem Investor Group A’s shares of stock in the Income Collecting Fund.

113. On or around May 21, 2021, Investor Group A independently learned of the

SEC’s investigation, and requested a full redemption of its shares in the Income Collecting Fund,

pursuant to the prospectus’ redemption terms.  At the time Investor Group A requested a full

redemption, its total investment in the Income Collecting Fund was approximately $106 million.

114. According to the terms of the prospectus, “Fund shares are available for daily

40

redemption” (p. 13), “[s]hares will be redeemable at the option of the Shareholder on any

Business Day and at any amount” (p. 17), and “[a] redemption request must be received by the

Administrator at least One (1) Business Day (or such lesser period as the Directors may

generally or in any particular case permits) prior to the relevant Redemption Day” (p. 17).

115. Investor Group A complied with the prospectus’ redemption requirements.

116. Despite Investor Group A’s compliance and the prospectus’ provision for “daily

redemption,” Abarbanel and the Income Collecting Fund did not honor Investor Group A’s

redemption request.

117.  Instead, Abarbanel and the Income Collecting Fund obfuscated the facts and set

up pretextual obstacles and roadblocks to delay and obstruct Investor Group A’s redemption

request, as follows:

a. On May 23, 2021, by letter emailed to Investor Group A, Abarbanel and the

Income Collecting Fund responded to Investor Group A’s redemption request.

Abarbanel and the Income Collecting Fund stated that Investor Group A’s

redemption request could not be fulfilled, because Investor Group A must

undergo an “omnibus review process[],” which would require the Income

Collecting Fund to appoint a “Money Laundering Compliance officer” and

“Money Laundering Reporting Officer.”

b. In subsequent communications with Investor Group A, including on June 1 and 4,

2021, Abarbanel and the Income Collecting Fund reiterated these and similar

requirements relating to purported anti-money laundering (“AML”) protocols.

c. In connection with Investor Group A’s redemption requests before May 2021,

Abarbanel and the Income Collecting Fund did not mention an “omnibus review

process,” insist on the appointment of money laundering officers, or impose any

AML protocols.

118. On May 27, 2021, Abarbanel and the Income Collecting Fund, provided Investor

Group A with a presentation, which represented that only a fraction of Investor Group A’s funds

were available and that a full redemption was not possible.  Abarbanel and the Income Collecting

Fund asserted that the Income Collecting Fund was holding approximately $88.9 million “sitting

in cash” ($84 million in a bank in Singapore; and $4.9 million “that can be further transferred to

the Fund from counterparty”), and an additional $25.9 million in cash and Treasuries “that are

still invested in lending agreement,” [sic] and not able to be liquidated.

119. In the May 27, 2021 presentation and during a telephone conversation later that

day, Abarbanel attempted to persuade Investor Group A to invest in a new investment vehicle set

up by Abarbanel, under which Investor Group A could redeem its shares in the Income

Collecting Fund and immediately reinvest its funds with Abarbanel in a different investment

vehicle, rather than obtaining a full return of its investment in cash.

120. On May 27, 2021, Investor Group A declined Abarbanel’s offer and again sought

a full return of its investment funds.  Investor Group A also requested that “this cash be secured

and no further investments or expenses be undertaken from these funds pending the redemption.”

121. Abarbanel and the Income Collecting Fund did not comply with Investor Group

A’s directive.  Instead, later the same day, Abarbanel and the Income Collecting Fund stated that

Investor Group A must complete a detailed and lengthy (18 page) “Wolfsberg Questionnaire” in

order for the Income Collecting Fund to fulfill Investor Group A’s redemption request.

Abarbanel and the Income Collecting Fund did not require completion of this questionnaire in

connection with Investor Group A’s prior redemption requests.

42

122. In subsequent communications with Investor Group A, Abarbanel and the Income

Collecting Fund imposed additional requirements and conditions for the redemption, including

demanding a “wet signature,” an itemization of the identity and net worth of beneficial owners

(including those not in Investor Group A), and other requirements and protocols.  Abarbanel and

the Income Collecting Fund did not impose these requirements in connection with Investor

Group A’s prior redemption requests.

123. Later that evening, Abarbanel and the Income Collecting Fund provided an update

to Investor Group A, stating that the Singapore bank was in the process of sending $66.9 million

to the Income Collecting Fund Bank Account, “which currently has a 17M balance.”

124. The refusal by Abarbanel and the Income Collecting Fund to honor Investor

Group A’s May 2021 redemption request is in stark contrast to the way in which Abarbanel and

the Income Collecting Fund engaged with Investor Group A and other investors concerning

redemption requests before Abarbanel learned of the SEC’s investigation.  For example, on or

about March 11, 2021, Investor Group A submitted a redemption request for $75 million to the

Income Collecting Fund by filling out a redemption request form downloaded from the Income

Collecting Fund’s website.  Within days, Investor Group A received $75 million by wire transfer

from the Income Collecting Fund.  Abarbanel and the Income Collecting Fund did not require

completion of an 18-page questionnaire, a wet signature, or compliance with any additional anti-

money laundering protocols before honoring Investor Group A’s redemption request.

125. During their numerous communications with Investor Group A in connection with

its May 2021 redemption request, Abarbanel and the Income Collecting Fund did not disclose to

Investor Group A that IS and NALR were controlled by Abarbanel and Chilelli, and that

Abarbanel therefore could readily arrange to terminate any lending agreements and effect the

43

return of $26 million from IS and NALR to the Income Collecting Fund and Investor Group A.

In fact, such daily liquidity was a requirement of the Income Collecting Fund’s prospectus.

B. Abarbanel and the Income Collecting Fund Sought to Force Investor Group A
to Accept Terms That Fell Far Short of a Full Redemption

126. On or about June 1, 2021, Abarbanel and the Income Collecting Fund also

informed Investor Group A that, to obtain a redemption, it would need to sign a new agreement,

referred to as “Annex B.”  Under this new agreement, Abarbanel and the fund proposed to satisfy

Investor Group A’s redemption request by providing Investor Group A with an unspecified

amount of money held by IS and NALR, along with the “future cash flow” from the Income

Collecting Fund’s lending agreements with counterparties IS and NALR.

127. These lending agreements were the Master Securities Loan Agreements into

which Abarbanel and State Funds entered with IS and NALR, rather than investing in secured

and collateralized Reverse Repos, as described in the prospectus, which were rolled over to the

Income Collecting Fund after Abarbanel de-registered State Funds.

128. In other words, Abarbanel and the Income Collecting Fund misused Investor

Group A’s funds to obtain the Master Securities Loan Agreements in the first place, and then

offered to give the proceeds of those unauthorized loan agreements, if any, to Investor Group A

as part of the package to satisfy Investor Group A’s redemption request.

129. Under Annex B, as provided to Investor Group A, in exchange for its receipt of

monies held by IS and NALR and future cash flows, Investor Group A would be required to

release its claims against the Income Collecting Fund, counterparties IS and NALR, and others.

130. Abarbanel and the Income Collecting Fund told Investor Group A that Annex B

reflected a “redemption in kind” under the terms of the Income Collecting Fund’s prospectus.

This was false.  The Income Collecting Fund’s prospectus provides that the Fund “reserves the

44

right to honor requests for redemption or repurchase orders by making payment in whole or in

part in readily marketable securities (“redemption in kind”) if the amount is greater than

$200,000 or 1% of the Fund’s assets.” (emphasis added).  The unsecured loan agreements

between the Income Collecting Fund and IS and NALR that Abarbanel and the Income

Collecting Fund attempted to require Investor Group A to assume as part of its redemption, are

not “readily marketable securities,” and therefore are not “redemptions in kind.”

131. Abarbanel and the Income Collecting Fund also told Investor Group A that they

were imposing a “forced redemption” under the Income Collecting Fund’s prospectus.  The

prospectus permits the Income Collecting Fund to impose a “forced redemption.”  Any “forced

redemption” requires actually redeeming the investor’s shares, however, in exchange for which

the investor releases its claims.  But that is not what Abarbanel and the Income Collecting Fund

proposed to do here.  Instead of redeeming Investor Group A’s shares in the Income Collecting

Fund by offering cash or “readily marketable securities,” Abarbanel and the Income Collecting

Fund instead offered whatever remained in IS and NALR’s accounts, and whatever future cash

flows the Master Securities Loan Agreements between the Income Collecting Fund and IS and

NALR might, in the future, generate.  Moreover, Abarbanel and the Income Collecting Fund

would only provide that insufficient redemption package if Investor Fund A released all of its

claims against the Income Collecting Fund, IS, NALR, and others.

132. In short, rather than complying with their obligation to honor Investor Group A’s

redemption request, Abarbanel and the Income Collecting Fund sought to coerce Investor Group

A into relinquishing its shares in the Income Collecting Fund and waiving all claims against the

Income Collecting Fund and others, in exchange for a package that included IS and NALR’s

accounts and the cash flow from the same Master Securities Loan Agreements that Abarbanel

45

and the Income Collecting Fund entered into by fraudulently using Investor Group A’s funds in

the first place.

133. Accordingly, Abarbanel and the Income Collecting Fund violated their

obligations to honor Investor Group A’s redemption requests and return its investment funds, and

they have unlawfully withheld such funds.

C. Abarbanel and the Income Collecting Fund Misappropriated, Depleted, and
Dissipated Investor Assets in the Income Collecting Fund

134. Documents obtained by the SEC in May 2021 reveal that IS and NALR’s

accounts hold less than $4 million, nowhere near the $26 million that Abarbanel and the Income

Collecting Fund claimed that IS and NALR were holding in the May 27, 2021 presentation.

135. Documents obtained by the SEC further showed that, in May 2021, the Income

Collecting Fund Bank Account held approximately $84 million—not the $17 million claimed by

Abarbanel and the Income Collecting Fund in their May 27 communications with Investor Group

A.

136. On June 4, 2021, after receiving Investor Group A’s redemption request,

Abarbanel and the Income Collecting Fund initiated a transfer of more than $64 million out of

the Fund’s bank account and into the Income Collecting Fund’s brokerage account.  From this

account, the funds were vulnerable to unauthorized investment losses, and to further

misappropriation, depletion, and dissipation by Abarbanel and the Income Collecting Fund.

137. Abarbanel and the Income Collecting Fund transferred the $64 million without

notice to Investor Group A and despite the fact that any redemption to Investor Group A would

need to be processed and transferred from the Income Collecting Fund Bank Account, not the

brokerage account.

138. On June 17, 2021, again without notice to investors, Abarbanel caused and

46

directed the Fund to transfer $10 million (USD) into a Vanguard account held by Fund counsel

in an unauthorized transaction.

139. Accordingly, Abarbanel and the Income Collecting Fund have misused and

misdirected Investor Group A’s investment funds, and any remaining funds are subject to further

misappropriation, depletion, or dissipation.

IV. The Relief Defendants Received Ill-Gotten Gains

140. Abarbanel, Chilelli, and the Income Collecting Fund diverted Income Collecting

Fund assets, including assets invested by Investor Group A, into accounts in the names of the

Relief Defendants—IS, NALR, GIH, CLO, ISC, and EMEA—which Abarbanel and Chilelli

formed, controlled, and operated.

141. These assets are ill-gotten gains for which the Relief Defendants gave no bona

fide consideration and to which they have no legitimate claim.  Therefore, these funds are subject

to disgorgement.

142. The following are non-exclusive summary charts of funds transferred into the

accounts of the Relief Defendants, all of which constitute such ill-gotten gains:

a. From March 2019 to November 2020, Abarbanel, Chilelli, and the Income

Collecting Fund transferred at least $102,500,000 (net) of Investor Group A’s

funds into NALR accounts, and at least $2,030,000 into IS accounts, pursuant to

the purported lending agreements described herein.  The below table indicates

Investor Group A’s subscriptions (funds deposited) into the Income Collecting

Fund Bank Account, Investor Group A’s redemptions (funds withdrawn) from

that account, and the corresponding immediate transfers of these assets to and

from the NALR and IS accounts:

47

Investment/
Redemption
Date

Amount Deposited in/
Withdrawn from
Income Collecting
Fund Bank Account

Counterparty Wire Date Amount Wired to/
from Counterparty

3/5/2019 $ 20,500,000.00 NALR 3/5/2019 $ (20,500,000.00)
3/15/2019 $ 3,000,000.00  NALR 3/15/2019 $ (3,000,000.00)
3/21/2019 $ 8,000,000.00 NALR 3/21/2019 $ (8,000,000.00)
4/24/2019 $ (1,000,000.00) NALR 4/24/2019 $ 1,000,000.00
5/10/2019 $ 2,000,000.00  NALR 5/10/2019 $ (2,000,000.00)
6/27/2019 $ 16,000,000.00  NALR 6/27/2019 $ (16,000,000.00)
8/7/2019 $ 7,500,000.00  NALR 8/7/2019 $ (7,500,000.00)
10/2/2019 $ 2,500,000.00  NALR 10/2/2019 $ (2,500,000.00)
1/2/2020 $ 5,000,000.00  NALR 1/2/2020 $ (5,100,000.00)
1/22/2020 $  (4,000,000.00) NALR 1/22/2020 $  4,000,000.00
1/28/2020 $  (2,500,000.00) NALR 1/28/2020 $  2,500,000.00
2/14/2020 $ 3,500,000.00  NALR 2/14/2020 $ (3,500,000.00)
3/13/2020 $ 9,000,000.00  NALR 3/13/2020 $ (9,000,000.00)
4/27/2020 $ 5,000,000.00  NALR 4/27/2020 $ (5,000,000.00)
5/22/2020 $ 2,030,000.00  IS 5/22/2020 $ (2,030,000.00)
7/27/2020 $ 2,000,000.00  NALR 7/27/2020 $ (2,000,000.00)
8/12/2020 $ 6,500,000.00  NALR 8/12/2020 $ (6,500,000.00)
8/18/2020 $ 7,500,000.00  NALR 8/18/2020 $ (7,500,000.00)
9/4/2020 $ 14,000,000.00  NALR 9/4/2020 $ (14,000,000.00)
11/17/2020 $  (2,000,000.00) NALR 11/17/2020 $  2,000,000.00

b. From at least April 2019 through January 2021, Abarbanel, Chilelli, and the

Income Collecting Fund transferred at least $9.4 million from NALR accounts

into accounts in the name of GIH, by way of the following transfers:

48

Date From To Amount
4/1/2019 NALR GIH $ 500,000.00
5/15/2019 NALR GIH $ 15,000.00
6/24/2019 NALR GIH $ 225,000.00
8/8/2019 NALR GIH $ 6,000,000.00
1/28/2020 NALR GIH $ 13,500.00
2/26/2020 NALR GIH $ 10,100.00
3/16/2020 NALR GIH $ 1,500,000.00
4/1/2020 NALR GIH $ 14,500.00
4/13/2020 NALR GIH $ 60,000.00
4/14/2020 NALR GIH $ 50,000.00
6/26/2020 NALR GIH $ 14,000.00
7/21/2020 NALR GIH $ 1,000,000.00
9/9/2020 NALR GIH $ 14,000.00
1/4/2021 NALR GIH $ 20,100.00
  Total: $ 9,436,200.00

c. From at least May 2019 through May 2021, Abarbanel and the Income Collecting

Fund transferred at least $700,000 into accounts held by CLO, by way of the

following transfers from Income Collecting Fund accounts:

Date From To Amount
5/10/2019 Fund CLO $ 12,000.00
7/5/2019 Fund CLO $ 16,892.48
8/8/2019 Fund CLO $ 15,346.14
9/5/2019 Fund CLO $ 17,224.22
9/26/2019 Fund CLO $ 1,000.00
10/1/2019 Fund CLO $ 13,013.61
10/17/2019 Fund CLO $ 1,500.00
10/28/2019 Fund CLO $ 16,742.29
12/3/2019 Fund CLO $ 22,196.97
1/2/2020 Fund CLO $ 21,769.81
1/31/2020 Fund CLO $ 22,170.85

49

3/2/2020 Fund CLO $ 21,553.35
4/1/2020 Fund CLO $ 23,956.66
4/30/2020 Fund CLO $ 22,717.82
6/1/2020 Fund CLO $ 25,400.50
7/1/2020 Fund CLO $ 24,084.55
8/4/2020 Fund CLO $ 16,616.70
9/1/2020 Fund CLO $ 25,480.40
10/1/2020 Fund CLO $ 33,294.86
11/2/2020 Fund CLO $ 36,353.88
12/1/2020 Fund CLO $ 33,965.55
1/4/2021 Fund CLO $ 37,475.70
2/1/2021 Fund CLO $ 45,818.35
2/26/2021 Fund CLO $ 45,997.56
4/2/2021 Fund CLO $ 73,424.80
4/30/2021 Fund CLO $ 15,000.00
5/3/2021 Fund CLO $ 10,939.40
5/24/2021 Fund CLO $ 48,915.26
  Total: $ 700,851.71

d. From at least May 2019 through April 2, 2021, Abarbanel and the Income

Collecting Fund transferred at least $627,000 worth of investors’ assets into

accounts they opened in the name of ISC, by way of the following transfers from

CLO accounts:

Date From To Amount
5/23/2019 CLO ISC $ 11,740.00
7/8/2019 CLO ISC $ 16,892.48
8/13/2019 CLO ISC $ 22,380.00
9/6/2019 CLO ISC $ 17,224.22
10/10/2019 CLO ISC $ 13,500.00
10/29/2019 CLO ISC $ 16,742.00
11/18/2019 CLO ISC $ 2,472.50
12/3/2019 CLO ISC $ 22,196.97

50

1/8/2020 CLO ISC $ 20,077.00
2/5/2020 CLO ISC $ 20,400.00
3/3/2020 CLO ISC $ 21,000.00
4/1/2020 CLO ISC $ 24,000.00
5/1/2020 CLO ISC $ 22,000.00
6/11/2020 CLO ISC $ 27,500.00
7/1/2020 CLO ISC $ 23,000.00
8/5/2020 CLO ISC $ 16,620.00
9/4/2020 CLO ISC $ 25,000.00
10/2/2020 CLO ISC $ 32,500.00
11/2/2020 CLO ISC $ 36,000.00
12/3/2020 CLO ISC $ 37,000.00
1/4/2021 CLO ISC $ 38,560.00
2/2/2021 CLO ISC $ 43,000.00
3/1/2021 CLO ISC $ 49,000.00
4/2/2021 CLO ISC $ 68,900.00
  Total: $ 627,705.17

e. From at least October 15, 2019 through August 18, 2020, Abarbanel and the Income

Collecting Fund transferred at least $1.4 million of investors’ assets into accounts

they opened in the name of EMEA, by way of the following transfers from ISC

accounts.  These assets originated from, and/or are traceable to, deposits made by

investors in State Funds and the Income Collecting Fund during the Relevant

Period:

51

Date From To Amount
10/15/2019 ISC EMEA $ 150,000.00
11/19/2019 ISC EMEA $ 15,000.00
11/20/2019 ISC EMEA $ 2,958.00
11/20/2019 ISC EMEA $ 2,000.00
1/6/2020 ISC EMEA $ 230,000.00
5/8/2020 ISC EMEA $ 5,000.00
8/18/2020 ISC EMEA $ 1,000,000.00
  Total: $ 1,404,958.00

143. During the Relevant Period, the Relief Defendants received other assets, in

addition to the above, that originated from, and/or are traceable to, investors in State Funds and

the Income Collecting Fund that are subject to disgorgement.

CLAIMS FOR RELIEF

COUNT I

Against Abarbanel, Chilelli, NY Alaska, and the
Income Collecting Fund for Violations of Section 17(a) of the Securities Act

[15 U.S.C. § 77q(a)]

144. The SEC realleges and incorporates by reference paragraphs 1 through 143.

145. By engaging in the acts and conduct alleged above, Abarbanel, NY Alaska, and

the Income Collecting Fund each directly or indirectly, in the offer or sale of securities, by use of

the means or instruments of transportation or communication in interstate commerce or by use of

the mails, (a) knowingly or recklessly employed devices, schemes, or artifices to defraud; (b)

with negligence, obtained money or property by means of untrue statements of material fact or

by omitting to state material facts necessary in order to make statements made, in the light of the

circumstances under which they were made, not misleading; and (c) with negligence, engaged in

transactions, practices, or courses of business which operated or would operate as a fraud or

deceit upon the purchasers, in violation of Sections 17(a)(1), (2) and (3) of the Securities Act [15

52

U.S.C. § 77q(a)(1), (2) and (3)].

146. By engaging in the acts and conduct alleged above, Chilelli directly or indirectly,

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

communication in interstate commerce or by use of the mails, (a) knowingly or recklessly

employed devices, schemes, or artifices to defraud with scienter; and (b) with negligence,

engaged in transactions, practices, or courses of business which operated or would operate as a

fraud or deceit upon the purchasers, in violation of Sections 17(a)(1) and (3) of the Securities Act

[15 U.S.C. § 77q(a)(1) and (3)].

147. By reason of the foregoing, Defendants violated and, unless restrained and

enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

COUNT II

Against Abarbanel, Chilelli, NY Alaska, and the Income Collecting Fund for
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder

[15 U.S.C. § 78q(b), 17 C.F.R. § 240.10b-5]

148.  The SEC realleges and incorporates by reference paragraphs 1 through 147.

149. By engaging in the acts and conduct alleged above, Abarbanel, NY Alaska, and

the Income Collecting Fund directly or indirectly, in connection with the purchase or sale of

securities, by the use of means or instrumentalities of interstate commerce, or of the mails, or of

a facility of a national security exchange, knowingly or recklessly, (a) employed devices,

schemes, or artifices to defraud; (b) made untrue statements of material fact or omitted to state

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

under which they were made, not misleading; and (c) engaged in acts, practices, or courses of

business which operated or would operate as a fraud or deceit upon other persons, including

purchasers and sellers of securities, in violation of Section 10(b) of the Exchange Act [15 U.S.C.

§ 78j(b)] and subsections (a), (b) and (c) of Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5(a), (b)

53

and (c)].

150. By engaging in the acts and conduct alleged above, Chilelli directly or indirectly,

in connection with the purchase or sale of securities, by the use of means or instrumentalities of

interstate commerce, or of the mails, or of a facility of a national security exchange, knowingly

or recklessly, (a) employed devices, schemes, or artifices to defraud; and (b) engaged in acts,

practices, or courses of business which operated or would operate as a fraud or deceit upon other

persons, including purchasers and sellers of securities, in violation of Section 10(b) of the

Exchange Act [15 U.S.C. § 78j(b)] and subsections (a) and (c) of Rule 10b-5 thereunder [17

C.F.R. § 240.10b-5(a) and (c)].

151. By reason of the foregoing, Defendants violated, and unless restrained and

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].

COUNT III

Against Abarbanel and Chilelli for Aiding and Abetting
Violations of Section 17(a) of the Securities Act

152. The SEC realleges and incorporates by reference paragraphs 1 through 151.

153. By engaging in the acts and conduct alleged above, Abarbanel, Chilelli, NY

Alaska, and the Income Collecting Fund violated Section 17(a) of the Securities Act [15 U.S.C.

§ 77q(a)].

154. By engaging in the acts and conduct alleged above, Abarbanel and Chilelli

knowingly or recklessly provided substantial assistance, and aided and abetted, each other, NY

Alaska, and the Income Collecting Fund in their violations of Section 17(a) of the Securities Act

[15 U.S.C. § 77q(a)].

155. Accordingly, pursuant to Section 15(b) of the Securities Act [15 U.S.C. § 77o(b)],

54

Abarbanel and Chilelli are in violation of Section 17(a) of the Securities Act to the same extent

as each other, NY Alaska, and the Income Collecting Fund.

156. By reason of the foregoing, Abarbanel and Chilelli are liable for aiding and

abetting the aforesaid violations, and unless restrained and enjoined will continue to commit such

violations.

COUNT IV

Against Abarbanel and Chilelli for Aiding and Abetting Violations of
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]

157. The SEC realleges and incorporates by reference paragraphs 1 through 156.

158. By engaging in the acts and conduct alleged above, Abarbanel, Chilelli, NY

Alaska, and the Income Collecting Fund violated 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].

159. By engaging in the acts and conduct alleged above, Abarbanel and Chilelli

knowingly or recklessly provided substantial assistance to, and aided and abetted, each other, NY

Alaska, and the Income Collecting Fund in their violations of 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].

160. Accordingly, pursuant to Section 20(e) of the Exchange Act [15 U.S.C. § 78t(e)],

Abarbanel and Chilelli are in violation of Section 10(b) of the Exchange Act and Rule 10b-5

thereunder to the same extent as each other, NY Alaska, and the Income Collecting Fund.

161. By reason of the foregoing, Abarbanel and Chilelli are liable for aiding and

abetting the aforesaid violations, and unless restrained and enjoined will continue to commit such

violations.

55

COUNT V

Against Abarbanel for Control-Person Liability for Violations of 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].

162. The SEC realleges and incorporates by reference paragraphs 1 through 161.

163. By engaging in the acts and conduct alleged above, NY Alaska and the Income

Collecting Fund, through the actions of, and under the control of Abarbanel, violated 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].

164. By reason of the conduct described above, and pursuant to Section 20(a) of the

Exchange Act [15 U.S.C. § 78t(a)], Abarbanel is liable for NY Alaska’s and the Income

Collecting Fund’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as

set forth above, in that he exercised actual power and control over NY Alaska and the Income

Collecting Fund and was a culpable participant in the violations by these entities.

165. Abarbanel did not act in good faith, and he induced, directly or indirectly, the acts

and conduct of NY Alaska and the Income Collecting Fund that violated the federal securities

laws, as alleged herein.

166. By reason of the foregoing, Abarbanel is liable to the same extent as NY Alaska

and the Incoming Collecting Fund, and unless restrained and enjoined will continue to do so.

COUNT VI

Against Abarbanel and NY Alaska for Violations of
Section 206(1) of the Investment Advisers Act [15 U.S.C. § 80b-6(1)]

167. The SEC realleges and incorporates by reference paragraphs 1 through 166.

168. By engaging in the acts and conduct set forth herein, Abarbanel and NY Alaska

were acting as investment advisers to State Funds within the meaning of Section 202(a)(11) of

56

the Advisers Act [15 U.S.C. § 80b-2(a)(11)] because they were persons who, for compensation,

engaged in the business of advising others, either directly or through publications or writings, as

to the value of securities or as to the advisability of investing in, purchasing, or selling securities.

169. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska

directly or indirectly, singularly or in concert, by use of the mails or means and instrumentalities

of interstate commerce, while acting as investment advisers, willfully engaged in transactions,

practices, or courses of business which operated as a fraud or deceit upon any client or

prospective client.

170. As investment advisers, Abarbanel and NY Alaska owed State Funds’ investors a

fiduciary duty of utmost good faith and had an affirmative duty to make full and fair disclosure

to investors of all material facts, as well as the duty to act in State Funds’ best interests, and not

act in their own interests to the detriment of State Funds and its investors.

171. Abarbanel and NY Alaska breached their fiduciary duties to State Funds and

engaged in fraudulent conduct that violated Section 206(1) of the Advisers Act [15 U.S.C. § 80b-

6(1)] by, among other ways as alleged herein, knowingly or recklessly making misstatements

and omissions of material fact; causing State Funds to enter into unsecured unauthorized lending

transactions with IS and NALR, counterparties that Abarbanel controlled; making unauthorized

transfers of State Funds’ assets to accounts that Abarbanel and NY Alaska controlled; engaging

in securities transactions that benefitted Abarbanel and NY Alaska and not State Funds;

misappropriating millions of dollars of investors’ money; and failing to disclose conflicts of

interests with State Funds that Abarbanel and NY Alaska created and from which they profited.

172. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless

enjoined will again violate, Section 206(1) of the Advisers Act [15 U.S.C. § 80b-6(1)].

57

COUNT VII

Against Abarbanel and NY Alaska for Violations of
Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(2)]

173. The SEC realleges and incorporates by reference paragraphs 1 through 172.

174. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska,

directly or indirectly, singularly or in concert, by use of the mails or means and instrumentalities

of interstate commerce, while acting as investment advisers, willfully engaged in transactions,

practices, or courses of business which operated as a fraud or deceit upon any client or

prospective client.

175. As investment advisers, Abarbanel and NY Alaska owed State Funds a fiduciary

duty of utmost good faith and had an affirmative duty to make full and fair disclosure to

investors of all material facts, as well as the duty to act in State Funds’ best interests, and not act

in their own interests to the detriment of State Funds.

176. Abarbanel and NY Alaska breached their fiduciary duties to State Funds and

engaged in fraudulent conduct that violated Section 206(2) of the Advisers Act [15 U.S.C. § 80b-

6(2)] by, among other ways as alleged herein, knowingly or recklessly making misstatements

and omissions of material fact; causing State Funds to enter into unsecured unauthorized lending

transactions with IS and NALR, counterparties that Abarbanel controlled; making unauthorized

transfers of investors’ funds to accounts that Abarbanel and NY Alaska controlled; engaging in

securities transactions that benefitted Abarbanel and NY Alaska and not State Funds;

misappropriating millions of dollars of investors’ money; failing to disclose conflicts of interests

with State Funds that Abarbanel and NY Alaska created and from which they profited.

177. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless

enjoined will again violate, Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(1)].

58

COUNT VIII

Against Abarbanel and NY Alaska for Violations of
Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)]

and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8(a)]

178. The SEC realleges and incorporates by reference paragraphs 1 through 177.

179. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska

were acting as investment advisers to State Funds within the meaning of Section 202(a)(11) of

the Advisers Act [15 U.S.C. § 80b-2(a)(11)] because they were persons who, for compensation,

engaged in the business of advising others, either directly or through publications or writings, as

to the value of securities or as to the advisability of investing in, purchasing, or selling securities.

180. State Funds was a pooled investment vehicle within the meaning of Rule 206(4)-

8(b) of the Advisers Act [17 C.F.R. § 275.206(4)-8(b)].  It was engaged in, held itself out as

being engaged primarily, and proposed to engage itself primarily in the business of investing,

reinvesting, and/or trading in securities, and thus was an investment company as defined in

Section 3(a) of the Investment Company Act [15 U.S.C. § 80a-3(a)], or would have been an

investment company under that provision but for the exclusion provided from that definition

under either Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940 [15

U.S.C. § 80a-3(c)(1) & (7)].

181. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska,

while acting as investment advisers to State Funds, by use of the means and instrumentalities of

interstate commerce and of the mails, willfully (1) made untrue statements of material fact and

omitted to state material facts necessary to make statements made, in the light of the

circumstances under which they were made, not misleading, to investors and prospective

investors in the pooled investment vehicles; and (2) engaged in acts, practices, and courses of

59

business that were fraudulent, deceptive, and manipulative with respect to investors and

prospective investors in pooled investment vehicles.

182. By reason of the foregoing, Abarbanel and NY Alaska have violated, and unless

enjoined will again violate, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)], and Rule

206(4)-8(a) thereunder [17 C.F.R. § 275.206(4)-8(a)].

183. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless

enjoined will again violate, Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(1)].

COUNT IX

Against Abarbanel and NY Alaska for Violations of
Section 34(b) of the Investment Company Act [15 U.S.C. § 80a-33(b)]

184. The SEC realleges and incorporates by reference paragraphs 1 through 183.

185. State Funds is an investment company, as defined in Section 3(a)(1)(A) of the

Investment Company Act [15 U.S.C. § 80a-3(a)(1)(A)] as it is an issuer that is, or that holds

itself out as, being engaged primarily in the business of investing, reinvesting, or trading in

securities.  State Funds was registered with the SEC as an investment company subject to the

provisions of the Investment Company Act.

186. Section 34(b) of the Investment Company Act makes it unlawful for any person to

make any untrue statement of a material fact in any registration statement, application, report,

account, record, or other document filed or transmitted pursuant to this title or the keeping of

which is required pursuant to Section 31(a), or to omit to state therein any fact necessary in order

to prevent the statements made therein, in the light of the circumstances under which they were

made, from being materially misleading.

187. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska,

acting willfully, made untrue statements of material fact in State Funds’ registration statements,

60

prospectuses, reports, accounts, records, and other documents filed or transmitted pursuant to this

title or the keeping of which is required pursuant to Section 31(a), and omitted to state in those

documents facts necessary in order to prevent the statements made therein, in the light of the

circumstances under which they were made, from being materially misleading.

188. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless

enjoined will again violate, Section 34(b) of the Investment Company Act [15 U.S.C. § 80a-

33(b)].

PRAYER FOR RELIEF

WHEREFORE, the SEC respectfully requests that this Court enter a judgment:

I.

Permanently restraining and enjoining Defendants from, directly or indirectly, violating

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

Abarbanel and NY Alaska from, directly or indirectly, violating Sections 206(1), (2), and (4) of

the Advisers Act and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8(a)]; and Section 34(b)

of the Investment Company Act [15 U.S.C. § 80a-33(b)].

II.

Permanently restraining and enjoining Defendants from, directly or indirectly,

participating in the issuance, purchase, offer, or sale of any security, including, but not limited to,

through any entity owned or controlled by Defendants, provided, however, that such injunction

shall not prevent Defendants Abarbanel and Chilelli from purchasing or selling securities listed

on a national securities exchange for their own personal accounts;

III.

Ordering Defendants and Relief Defendants to disgorge their ill-gotten gains according to

proof, plus prejudgment interest thereon;

IV.

Ordering Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act

[15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 209(e) of

the Advisers Act [15 U.S.C. § 80b-9(e)], and Section 42(e) of the Investment Company Act [15

U.S. § 80a-41(e)]; and

V.

Granting such other and further relief as this Court may deem just, equitable, or

necessary, including but not limited to the asset freeze, accounting, and ancillary relief requested

by the SEC.

JURY DEMAND

 Plaintiff demands a trial by jury.

Dated:  January 27, 2022          Respectfully submitted,

Of counsel:

David A. Becker
Virginia M. Rosado Desilets
Gregory C. Padgett
Alexandra M. Arango
SECURITIES AND EXCHANGE
COMMISSION
100 F Street, N.E.
Washington, D.C. 20549

/s/ Paul W. Kisslinger
Paul W. Kisslinger (PK0764)
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
(202) 551-4427 (Kisslinger)
[email protected]

Counsel for Plaintiff Securities and Exchange
Commission

SEC v. Abarbanel, et al.
APPENDIX A:  MATERIAL MISREPRESENTATIONS IN STATE FUNDS FILINGS

Date How Published Statement/Omission Why False and/or Misleading

March 7, 2017 Form N-1A/A Principal Investment Strategies: “In order to enhance
income, the Fund intends to enter into securities
lending, repurchase agreement and/or reverse
repurchase agreement transactions that provide the
Fund with income at either fixed or floating (variable)
interest rates and fees. The Fund may lend its portfolio
of securities to broker/dealers, institutional investors,
banks, mutual funds, and insurance and/or reinsurance
companies located in one of the member countries of
The Organization for Economic Co-operation and
Development (“OECD”).”
[Hereinafter Misrepresentation A]

The Fund did not lend its portfolio of securities to anyone.
Further, the loans the Fund did make were to single-member
LLCs with no operations or assets outside of its transactions with
the Fund; none were broker/dealers, institutional investors,
banks, mutual funds, and insurance and/or reinsurance
companies.   Further, this description of potential counterparties
was rendered misleading by the omission of any disclosure that
the Fund’s manager and control person also controlled the Fund’s
counterparties.
[Hereinafter Explanation A]

March 7, 2017 Form N-1A/A Principal Investment Strategies: “Securities lending
allows the Fund to retain ownership of the securities
loaned and, at the same time, earn additional income
from fees paid by borrowers. Loans will be made only
to parties who have been reviewed and deemed
satisfactory by New York Alaska ETF Management
LLC, the Fund’s investment adviser (the “Adviser”),
pursuant to guidelines adopted by the Board of Trustees
(the “Board” or the “Board of Trustees”) of State Trust
(the “Trust”) . . . .”
[Hereinafter Misrepresentation B]

These representations were rendered misleading by the omission
of any disclosure that the counter-parties were controlled by
Abarbanel, control person for the Fund and for the Adviser; and
by the omission of any disclosure that the Fund’s Board of
Trustees was controlled by Abarbanel and failed to exercise
independent judgment.
[Hereinafter Explanation B]

March 7, 2017 Form N-1A/A Principal Investment Strategies: “Loans will be made
only to parties who have been reviewed and deemed
satisfactory . . . and which provide collateral, which is
either (i) 102% cash or (ii) 102%-115% U.S.
government securities. The collateral is marked to
market daily and, if the value of the existing collateral
decreases or the value of the securities lent increases,
the borrower will be required to post additional
collateral.” [Hereinafter Misrepresentation C]

The Fund made loans to IS and NALR without receiving any
collateral in the form of cash or U.S. government securities.
[Hereinafter Explanation C]

63

Date How Published Statement/Omission Why False and/or Misleading

March 7, 2017 Form N-1A/A “Repurchase transactions involve the purchase of
securities with an agreement to resell the securities at an
agreed-upon price, date and interest payment. Reverse
repurchase transactions involve the sale of securities
with an agreement to repurchase the securities at an
agreed-upon price, date and interest payment and have
the characteristics of borrowing. Proceeds (collateral)
received with respect to reverse repurchase agreements
include cash, U.S. Treasury securities or debt
instruments secured by U.S. Treasury securities.”
[Hereinafter Misrepresentation D]

The Fund never sold securities to IS or NALR, nor did IS or
NALR ever sell securities to State Funds.

The Fund did not receive cash, U.S. Treasury securities, or debt
instruments secured by U.S. Treasury securities as collateral for
the reverse repurchase agreements.  While the Fund received
purported “debt instruments,” referred to by Abarbanel as
“secured bonds,” they were simply unsecured promissory notes.
[Hereinafter Explanation D]

March 7, 2017 Form N-1A/A “The Fund will earmark or establish a segregated
account in which it will maintain cash, U.S. Treasury
securities or other liquid portfolio securities equal in
value to its obligations in respect of reverse repurchase
agreements.” [Hereinafter Misrepresentation E]

The Fund did not earmark or establish a segregated account to
hold cash, U.S. Treasury securities, or other liquid portfolio
securities equal in value to its obligations in respect of reverse
repurchase agreements.  No such collateral was ever received by
the Fund.  [Hereinafter Explanation E]

June 30, 2017 Form N-CSR “Reverse Repurchase Agreements - The Fund may also
enter into reverse repurchase agreements with
counterparties.  In a typical reverse repurchase
agreement, the Fund enters into a contract with a
counterparty under which (i) the Fund sells securities
for cash or cash equivalents to the counterparty, and (ii)
the Fund agrees to repurchase the securities at an
agreed-upon price, date and interest payment.”
[Hereinafter Misrepresentation F]

The Fund never sold securities to its purported reverse repurchase
agreement counterparties, nor did the fund receive cash or cash
equivalents from its reverse repurchase agreement counterparties.

The Fund never repurchased any securities from its
counterparties.  [Hereinafter Explanation F]

June 30, 2017 Form N-CSR “While a reverse repurchase agreement has legal
characteristics of both a sale and a secured transaction,
economically it functions as a loan from the
counterparty to the Fund, in which the securities
purchased by the counterparty serve as collateral for the
loan.
Securities received by the Fund through reverse
repurchase agreements include cash, U.S. Treasury
securities or debt instruments secured by U.S. Treasury
securities.” [Hereinafter Misrepresentation G]

The counterparties to the Fund’s reverse repurchase agreements
never made a loan to the Fund; to the contrary, the Fund loaned
money to the counterparties.

The Fund did not receive cash, U.S. Treasury securities, or debt
instruments secured by U.S. Treasury securities through the
reverse repurchase agreements.  [Hereinafter Explanation G]

June 30, 2017 Form N-CSR See Misrepresentation E See Explanation E

64

Date How Published Statement/Omission Why False and/or Misleading

December 31, 2017  Form N-CSR See Misrepresentation F See Explanation F

December 31, 2017  Form N-CSR See Misrepresentation G See Explanation G
December 31, 2017  Form N-CSR “There are many existing examples that borrowers earn

profit in spite of their borrowing activity . . . . In the
Fund’s case, the fund charges additional fees that turn
its borrowing activity into profits by charging fees for
allowing its counterparties to substitute the proceeds
(collateral) it receives for reasons such as substituting
collateral durations.”
[Hereinafter Misrepresentation H]

The Fund neither borrowed money from its counterparties nor
sent them collateral that they would have been able to substitute.
[Hereinafter Explanation H]

March 29, 2018 Form 485POS See Misrepresentation A See Explanation A

March 29, 2018 Form 485POS See Misrepresentation B See Explanation B

March 29, 2018 Form 485POS See Misrepresentation C See Explanation C
March 29, 2018 Form 485POS See Misrepresentation D See Explanation D

March 29, 2018 Form 485POS “[T]he Fund will invest over 5% of its assets in reverse
repurchase agreements in which proceeds (collateral)
received with respect to reverse repurchase agreements
will include cash, U.S. Treasury securities or debt
instruments secured by U.S. Treasury securities.”
[Hereinafter Misrepresentation I]

The Fund never received collateral in the form of cash, U.S.
Treasury securities, or debt instruments secured by U.S. Treasury
securities. [Hereinafter Explanation I]

March 29, 2018 Form 485POS See Misrepresentation E See Explanation E

March 31, 2018 Form N-Q See Misrepresentation E See Explanation E

March 31, 2018 Form N-Q See Misrepresentation F See Explanation F

March 31, 2018 Form N-Q See Misrepresentation H See Explanation H

March 31, 2018 Form N-Q See Misrepresentation G See Explanation G
March 31, 2018 Form N-Q See Misrepresentation I See Explanation I

65

Date How Published Statement/Omission Why False and/or Misleading

June 30, 2018 Form N-CSR “Collateral is secured by at least 102% of the underlying
US treasuries:
U.S Treasury Bill 0.00%, 08/23/18
U.S Treasury Bill 0.00%, 08/30/18
U.S Treasury Bill 0.00%, 09/06/18
U.S Treasury Bill 0.00%, 09/20/18
U.S Treasury Bill 0.00%, 09/27/18
U.S Treasury Bill 0.00%, 10/11/18
U.S Treasury Bill 0.00%, 10/25/18”

Investors reasonably understood this to mean that the Fund held
collateral in the form of U.S. Treasury securities in the amount
and maturation stated in the Form N-CSR.  The Fund never held
collateral in the form of U.S. Treasury securities.

To the extent this disclosure is intended to convey that the Fund
held debt instruments that were secured by the T-bills listed in the
Form N-CSR, this was not only misleading but also false.  The
purported debt instruments were unsecured.  The T-bills listed
were held at a brokerage account in the name of, and under the
complete control of, the counterparties.  In addition, the
counterparties borrowed against the T-bills, leaving them as
collateral for margin loans in amounts of approximately 95% of
the value of the T-bills.  As a result, the T-bills could not have
secured any debt agreements to the fund, as they were already
collateralizing the counterparties’ significant margin loans from
the broker.  None of these facts was disclosed to investors.
[Hereinafter Explanation J]

June 30, 2018 Form N-CSR See Misrepresentation F See Explanation F
June 30, 2018 Form N-CSR See Misrepresentation H See Explanation H

June 30, 2018 Form N-CSR See Misrepresentation G See Explanation G

June 30, 2018 Form N-CSR See Misrepresentation I See Explanation I

June 30, 2018 Form N-CSR See Misrepresentation E See Explanation E

September 30, 2018 Form N-Q See Misrepresentation E See Explanation E

September 30, 2018 Form N-Q “Collateral received is secured by at least 102% of the
following underlying US treasuries:
U.S Treasury Bill 0.00%, 11/29/18
U.S Treasury Bill 0.00%, 12/27/18
U.S Treasury Bill 0.00%, 02/21/19”

See Explanation J

September 30, 2018 Form N-Q See Misrepresentation F See Explanation F
September 30, 2018 Form N-Q See Misrepresentation H See Explanation H

September 30, 2018 Form N-Q See Misrepresentation G See Explanation G

September 30, 2018 Form N-Q See Misrepresentation I See Explanation I

66

Date How Published Statement/Omission Why False and/or Misleading

December 31, 2018 Form N-CSR/A “As required by Prospectus, the US Treasuries
securities that secure the collateral asset received are:
U.S Treasury Bill 0.00%, 06/20/2019
U.S Treasury Bill 0.00%, 05/16/2019
U.S Treasury Bill 0.00%, 07/18/2019
U.S Treasury Bill 0.00%, 05/09/2019
U.S Treasury Bill 0.00%, 04/25/2019”

See Explanation J

December 31, 2018 Form N-CSR/A See Misrepresentation F  See Explanation F
December 31, 2018 Form N-CSR/A “In the Fund’s case, the fund collects fee income that

turn its borrowing activity into profits by charging fees
for allowing its counterparties to substitute the proceeds
(collateral) it receives for reasons such as substituting
collateral durations while the fund conducts daily mark-
to-market price monitoring as well as calculating the
collateral’s change in dollar value per every increase or
decrease of 0.01% in yield, such risk management
calculation is also known as calculating the Dollar
Value change per every change of one basis point . . . .
”

See Explanation H

December 31, 2018 Form N-CSR/A Offsetting Assets and Liabilities: “The Fund is party to
Master Repurchase Agreements that govern
transactions between the Fund and selected
counterparties. On the Statement of Assets and
Liabilities, as permitted by US GAAP, the Fund has
elected to offset the amounts owed to these
counterparties with the Securities received from the
same counterparty under the reverse repurchase
agreements.”

The Fund neither owed any amounts to the repurchase agreement
counterparties nor received any securities from those
counterparties.

UNITED STATES DISTRICT COURT 
 SOUTHERN DISTRICT OF NEW YORK   

SECURITIES AND EXCHANGE COMMISSION, 
 

 

                                                              Plaintiff, 
vs. 

 

 

OFER ABARBANEL, VICTOR CHILELLI, 
INCOME COLLECTING 1-3 MONTHS T-BILLS 
MUTUAL FUND, and NEW YORK ALASKA ETF 
MANAGEMENT LLC, 
 

Defendants, 

 
 
Civil Action No. 21-CV-5429 (RA) 

 
 
ECF CASE 

 
And 

 
INSTITUTIONAL SYNDICATION LLC, NORTH 
AMERICAN LIQUIDITY RESOURCES LLC, 
INSTITUTIONAL SECURED CREDIT LLC, 
GROWTH INCOME HOLDINGS LLC, CLO 
MARKET NEUTRAL LLC, and GLOBAL EMEA 
HOLDINGS LLC, 

 
Relief Defendants. 

 

 

      
AMENDED COMPLAINT 

Plaintiff United States Securities and Exchange Commission (the “SEC” or 

“Commission”) alleges as follows: 

SUMMARY 

1. From at least March 2017 through June 2021 (the “Relevant Period”), Defendants 

(i) Ofer Abarbanel (“Abarbanel”), (ii) Victor Chilelli (“Chilelli”), and (iii) New York Alaska 

ETF Management LLC (“NY Alaska”), the registered investment adviser that Abarbanel formed 

and controlled, engaged in a fraudulent scheme to deceive and defraud investors in two mutual 

funds that Abarbanel also formed and controlled:  a domestic fund, the State Funds – Enhanced 

Ultra-Short Duration Mutual Fund (“State Funds”), registered in the United States; and an off-

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 1 of 66



 

2 

shore fund, the Income Collecting 1-3 Months T-Bills Mutual Fund (“Income Collecting Fund”), 

registered in the Cayman Islands (collectively, the “Funds”).  

2. During the course of their investment scheme, Abarbanel, with the assistance of 

NY Alaska and Chilelli, used the Funds to deplete, dissipate, and misappropriate investor assets 

through a fraudulent course of conduct that included the creation of nominee shell companies, 

the diversion of funds to these shell companies in unauthorized, uncollateralized loan 

transactions that violated the terms set forth in the Funds’ public filings, prospectuses, and other 

documents issued to investors, and the submission of false and misleading statements of material 

facts to investors to disguise Defendants’ misconduct and further their scheme. 

3. The investment scheme was composed of two overlapping phases led by 

Abarbanel: a domestic phase, lasting from approximately March 2017 through February 2019, 

and an offshore phase, lasting from approximately March 2018 through June 2021.  In both 

domestic and offshore phases, the Defendants engaged in similar tactics to solicit and then 

misuse investor funds, as described herein:  making false and misleading statements about the 

Funds; using the Funds to enter into unauthorized, uncollateralized loan transactions with 

counterparty shell companies that Defendants controlled; and then using misappropriated 

investor funds to engage in unauthorized, often high-risk, trading activities to benefit themselves, 

but not the Funds or their investors. 

4. The Domestic Phase:  From approximately March 2017 through February 2019, 

Abarbanel and NY Alaska perpetrated the fraudulent scheme through State Funds, the United 

States-based mutual fund registered with the SEC that Abarbanel formed and controlled, with the 

assistance of Chilelli.  Despite telling investors that State Funds was going to invest, and had 

invested, in certain types of conservative, asset-backed securities transactions known as reverse 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 2 of 66



 

3 

repurchase agreements (“Reverse Repos”)1 with independent financial institutions, Abarbanel 

and NY Alaska instead caused State Funds to enter into unauthorized, uncollateralized loan 

transactions with counterparty shell companies that Abarbanel and Chilelli created and 

controlled. 

5. The domestic phase lasted until early 2019, when certain investors became 

suspicious and began to make inquiries into State Funds and its investment activities.  In 

February 2019, in the face of such scrutiny, Abarbanel closed down State Funds, and transferred 

operations to the Income Collecting Fund, the offshore fund registered in the Cayman Islands 

that Abarbanel formed and controlled, with the assistance of Chilelli.   

6. When closing down State Funds in early 2019, Abarbanel and NY Alaska forced 

U.S. investors to redeem their shares and close out their investments, and moved non-U.S. 

investors to the Income Collecting Fund.  Because there were insufficient assets available to 

provide full redemptions to State Funds’ investors, Abarbanel had to commingle and 

misappropriate new funds invested by Income Collecting Fund investors in order to pay off the 

older State Funds investors.  Thus, although all investors in State Funds were fully redeemed, it 

                                                 
1     The Securities Industry and Financial Markets Association (“SIFMA”), describes repurchase 
agreements, and the other side of these collateralized lending transaction, reverse repurchase agreements, 
as follows: 

A repurchase agreement [] is a financial transaction in which one party sells an asset to another 
party with a promise to repurchase the asset at a pre-specified later date (a reverse repo is the 
same transaction seen from the perspective of the security buyer).  … The repo market enables 
market participants to provide collateralized loans to one another, and financial institutions 
predominantly use repos to manage short-term fluctuations in cash holdings, rather than general 
balance sheet funding. …  Repos offer cash providers collateralization (with additional margin 
requirements in most cases) marked-to-market daily to ensure continuing protection. 

See SIFMA, US Repo Market Fact Sheet (January 19, 2021) (available at https://www.sifma.org 
/resources/research/us-repo-market-fact-sheet). 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 3 of 66



 

4 

was at the expense of new investors in the Income Collecting Fund—a hallmark of a typical 

Ponzi scheme.  

7. The Offshore Phase:  Following the closure of State Funds, Abarbanel, Chilelli, 

and the Income Collecting Fund continued to perpetrate their fraudulent course of conduct 

through the Cayman Islands registered Income Collecting Fund, using the same tactics employed 

during the domestic phase.  The Income Collecting Fund, in contrast to State Funds, was not 

registered with the SEC and did not issue public filings with the SEC, and thus provided no 

comparable disclosure about its operations to United States regulators. 

8. Between approximately March 2019 and June 2021, Abarbanel and the Income 

Collecting Fund entered into similar unauthorized, uncollateralized loan transactions with 

nominee shell companies that Abarbanel and Chilelli controlled, while misrepresenting to 

investors that the transactions were collateralized Reverse Repos entered into with independent 

third parties.   

9. Abarbanel, Chilelli, and the Income Collecting Fund continued the offshore phase 

of the scheme through 2019, 2020, and into 2021.  In February 2021, the United States 

Attorney’s Office for the Southern District of New York (USAO) approached Chilelli and 

another individual associated with State Funds and the Income Collecting Fund, revealing a 

criminal investigation into the Funds.  Around the same, the SEC issued subpoenas to Abarbanel 

and others, in which the SEC disclosed its own investigation of Abarbanel and the Funds.  

Confronted by these investigations, Abarbanel again forced investors to redeem, ultimately 

paying back all investors in the Income Collecting Fund, with the exception of its largest group 

of investors, Investor Group A.  At the time of the forced redemptions, Investor Group A had 

approximately $106 million in assets invested with the Income Collecting Fund.   

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 4 of 66



 

5 

10. In May 2021, Investor Group A demanded a full redemption of its $106 million 

outstanding investment in the Income Collecting Fund.  Due to Defendants’ misappropriation, 

dissipation, and depletion of investor deposits, however, Abarbanel and the Income Collecting 

Fund were without sufficient funds to redeem Investor Group A.  Instead of returning the 

remaining funds to Investor Group A, Abarbanel and the Income Collecting Fund engaged in 

pretextual actions, and made material misrepresentations to Investor Group A, to avoid Investor 

Group A’s redemption demands, in violation of the redemption terms in the Income Collecting 

Fund’s prospectus.   

11. Abarbanel formed, controlled, and operated the Funds and NY Alaska.  Abarbanel 

and NY Alaska are investment advisers, and as such, owed their client, State Funds, fiduciary 

duties that encompassed a duty of loyalty to the Fund. 

12. Abarbanel and Chilelli also formed, controlled, and/or operated two limited 

liability companies (LLCs), Institutional Syndication LLC (“IS”), and North American Liquidity 

Resources LLC (“NALR”) that they used, as counterparty shell companies, to enter into the 

unauthorized, uncollateralized lending agreements with the Funds, as described herein.   

13. Abarbanel and Chilelli also formed, controlled, and/or operated at least four other 

LLCs, which they used to receive, hold, transfer, and misappropriate investors’ assets in 

furtherance of the scheme:  Institutional Secured Credit LLC (“ISC”), Growth Income Holdings 

LLC (“GIH”), CLO Market Neutral LLC (“CLO”), and Global EMEA Holdings LLC 

(“EMEA”).   

14. These LLCs formed, controlled, and/or operated by Abarbanel and Chilelli (IS, 

NALR, ISC, GIH, CLO, and EMEA) are Relief Defendants that received ill-gotten proceeds of 

the fraudulent scheme that are subject to disgorgement. 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 5 of 66



 

6 

15. On June 18, 2021, to preserve the status quo and prevent further misappropriation, 

dissipation, and depletion of assets, the SEC moved the Court by an emergency ex parte 

application to freeze Income Collecting Fund assets and for other relief.  On that date, the Court 

granted the SEC’s emergency application, freezing designated accounts containing Income 

Collecting Fund assets.  On June 23, 2021, the USAO filed a two-count complaint (Securities 

Fraud and Wire Fraud) against Abarbanel in the Southern District of New York, United States v. 

Abarbanel, 1:21-mj-06425-UA (S.D.N.Y). 

16. Summary of Fraudulent Conduct:  As detailed below, the fraudulent scheme 

that Abarbanel organized and implemented involved a number of common deceptive acts, and 

false and misleading statements of material fact, in both the domestic and offshore phases.  

These include: 

a. Making False Representations About the Funds and Funds Investments.  

From at least March 2017 through May 2021, Abarbanel caused NY Alaska (for 

State Funds) and the Income Collecting Fund to issue documents in public filings 

(State Funds), and in prospectuses, website postings, fact statements, and other 

communications with investors (both Funds) (collectively, “Funds Documents”), 

making materially false and misleading representations about the Funds’ 

investments and investment strategies, the Reverse Repos they claimed to be 

entering into, and the Funds’ holdings, earnings, and performance.  Given 

Abarbanel’s control over the Funds, NY Alaska, the Relief Defendants, and the 

transactions that these entities entered into, Abarbanel (and thus NY Alaska) 

knew at the time that the statements were made, or was reckless in not knowing, 

that they were materially false and misleading. 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 6 of 66



 

7 

b. Soliciting and Receiving Investor Deposits.  From March 2017 through 

February 2021, Defendants solicited, and investors deposited, in total, more than 

$200 million into accounts held by the Funds, while contemporaneously, 

Abarbanel, NY Alaska, and persons under Abarbanel’s direction and control, 

issued materially false and misleading representations to investors in Funds 

Documents and other communications.   

c. Entering Into Unauthorized, Unsecured Lending Transactions With 

Nominee Shell Companies.  As soon as investors deposited their assets into 

Funds’ accounts, Abarbanel caused and directed NY Alaska (for State Funds) and 

the Income Collecting Fund to enter into purported Reverse Repo loan 

transactions with IS and NALR, the nominee shell companies that Abarbanel and 

Chilelli, at Abarbanel’s direction, formed and controlled for this purpose.  These 

loan transactions were not secured or collateralized; were not made in arms-length 

transactions with independent, well-funded institutions; and were far removed 

from the type of secured, collateralized Reverse Repos represented, promised, and 

required in Funds Documents.   

d. Transfer of Funds to Shell Companies.  Abarbanel then directed and caused NY 

Alaska (for State Funds) and the Income Collecting Fund to transfer investor 

deposits from the Funds’ bank accounts to bank accounts that Abarbanel and 

Chilelli, at Abarbanel’s direction, set up in the names of IS and NALR. 

e. Misappropriation of Funds Assets through Unauthorized Trading in Relief 

Defendant Accounts.  Abarbanel and Chilelli, at Abarbanel’s direction, then 

directed and caused IS and NALR to transfer investor funds to brokerage accounts 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 7 of 66



 

8 

in the names of IS, NALR, and other nominee shell companies that Abarbanel and 

Chilelli controlled, including Relief Defendants ISC, GIH, CLO, and EMEA.  

From these brokerage accounts, Abarbanel and Chilelli, at Abarbanel’s direction, 

then used investor assets to engage in tens of millions of dollars worth of 

unauthorized securities trading, for Abarbanel’s own benefit, not for the benefit of 

the Funds or their investors.  The trading was often on margin (using funds 

borrowed from the brokerage firm), and often employed high-risk, volatile 

options and futures trading strategies—far different from the conservative, 

collateralized Reverse Repos described in Funds Documents.  In essence, 

Abarbanel was using Funds investors’ assets as “house money” to speculate and 

gamble at no risk to his own wealth. 

f. Misappropriation and Depletion of Investor Funds:  Throughout the course of 

the fraudulent scheme, Abarbanel, NY Alaska, and the Income Collecting Fund 

misappropriated, dissipated, and depleted tens of millions of dollars worth of 

investor assets through trading losses and other unauthorized diversions of funds. 

 Trading losses:  Abarbanel’s high-risk trading strategies, in both the 

domestic and offshore phases, were unsuccessful, leading to millions of dollars of 

trading losses during the Relevant Period.  Abarbanel attempted to conceal these 

losses from investors using various methods, including making false statements in 

Funds Documents and other communications; repeatedly rolling over the 

purported Reverse Repos entered into between the Funds and his nominee shell 

companies; commingling assets; and eventually, by using new investors’ funds to 

pay off old investors—a hallmark of a typical Ponzi scheme.     

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 8 of 66



 

9 

 Diversion of Funds:  During the Relevant Period, Abarbanel also directed 

the Funds and Relief Defendants to make and effect other unauthorized transfers 

of cash for his own benefit.  For example, in March 2020, Abarbanel caused ISC 

to enter into sham lending and assignment agreements with the Income Collecting 

Fund and NALR that improperly relieved Abarbanel of the obligation to repay 

approximately $5.6 million he previously misappropriated and diverted to ISC 

(and other entities, including EMEA) for his personal use.  On June 4, 2021, 

Abarbanel directed and caused the Income Collecting Fund to transfer $64 million 

of Investor Group A’s assets into a brokerage account from which no redemptions 

could be drawn, and from which investor funds were subject to further 

misappropriation, dissipation, and depletion.  On or about June 16, 2021, two 

days before this action was commenced, Abarbanel directed and caused the 

Income Collecting Fund to transfer $10 million of Investor Group A’s assets to a 

brokerage account held by then-counsel to the Income Collecting Fund. 

17. By engaging in the above-described misconduct, Defendants have violated, and 

unless restrained and enjoined will continue to violate, the antifraud provisions of the Securities 

Act of 1933 (“Securities Act”) [15 U.S.C. § 77 et seq.] and the Securities Exchange Act of 1934 

(“Exchange Act”) [15 U.S.C. § 78 et seq.] and rules thereunder.  Abarbanel and NY Alaska have 

further violated, and unless restrained and enjoined will continue to violate Sections 206(1), (2), 

and (4) of the Investment Advisers Act of 1940 [15 U.S.C. § 80b-6(1), (2), and (4)] (“Advisers 

Act”) and Rule 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940 

(“Investment Company Act”) [15 U.S.C. § 80a-33(b)]. 

 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 9 of 66



 

10 

NATURE OF PROCEEDING AND RELIEF SOUGHT 

18. The SEC brings this action pursuant to Section 20(d) of the Securities Act 

[15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 209(b) of 

the Advisers Act [15 U.S.C. § 80b-9(d)], and Sections 42(d) and (e) of the Investment Company 

Act [15 U.S.C. §§ 80a-41(d) and 80a-41(e)] to seek an order enjoining the transactions, acts, 

practices, and courses of business alleged in this Complaint, disgorgement of ill-gotten gains, 

civil penalties, and such further relief that the Court may deem appropriate. 

JURISDICTION AND VENUE 

19. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 

22(a) of the Securities Act [15 U.S.C. §§ 77t(b),77t(d) and 77v(a)], Sections 21(d), 21(e), and 27 

of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa], Sections 209(d), 209(e), and 214 

of the Advisers Act [15 U.S.C. §§ 80b-9(d), 80b-9(e), 80b-14], Sections 42(d), 42(e), and 44 of 

the Investment Company Act [15 U.S.C. §§ 80a-41(d), 80a-41(e), 80a-43], and 28 U.S.C. 

§ 1331. 

20. Venue in this District is proper pursuant to Section 22(a) of the Securities Act [15 

U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].  Defendants transact 

business in this District, and certain of the acts, practices, transactions, and courses of business 

constituting the violations alleged in this Complaint occurred within this District, and were 

effected, directly or indirectly, by making use of the means, instruments, or instrumentalities of 

transportation or communication in interstate commerce, or of the mails, or the facilities of 

national securities exchanges. 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 10 of 66



 

11 

DEFENDANTS 

21. Ofer Abarbanel, age 47, is a citizen of Israel, and has resided in Woodland Hills, 

California since at least 2016.  Abarbanel carries an Israeli passport.  From at least October 2014 

to the present, Abarbanel was the owner and sole control person for NY Alaska, a limited 

liability company registered with the SEC as an investment adviser from approximately January 

2015 to March 2019.  From his residence in California, Abarbanel also exercised full control 

over the Funds, their operations and investments, and their dealings with investors.  Abarbanel 

also controls the Relief Defendants.  He directed Chilelli to form IS and NALR, and is the named 

manager of ISC, CLO, and GIH.  Abarbanel also controls bank accounts in at least Israel, 

Singapore, and the Cook Islands—and likely the Cayman Islands and the Bahamas—in his name 

and in the names of the Funds, ISC, T-Bill Securities, CLO, and EMEA.  

22. Victor Chilelli, age 52, is a United States citizen residing in Lewes, Delaware. 

Until 2020, Chilelli resided in Staten Island, New York.  Until November 2016, Chilelli was 

Portfolio Manager for NY Alaska.  Until October 2017, Chilelli was Deputy Compliance Officer 

for State Funds.  At all relevant times, Chilelli provided substantial assistance to Abarbanel, NY 

Alaska, and the Income Collecting Fund in their execution of the fraudulent scheme.  In 

particular, at Abarbanel’s direction, Chilelli participated in the component of the scheme 

involving the unauthorized transfer of Funds assets to IS and NALR and the other Relief 

Defendants.   

23. Income Collecting 1-3 Months T-Bills Mutual Fund (the “Income Collecting 

Fund”) is a mutual fund registered in the Cayman Islands (registration number CR-319456), 

which consists of multiple share classes quoted on the Nasdaq market headquartered in New 

York City and using Nasdaq symbols including “BILLX,” “GOVAX,” “GOVBX,” “GOVDX,” 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 11 of 66



 

12 

“GOVTX,” and “USABX.”  As of May 21, 2021, all share classes in the Income Collecting Fund 

other than GOVBX have been fully redeemed.  The Income Collecting Fund is not registered 

with the SEC, and has or had directors on its Board of Trustees located in New York, Florida, 

California, the Cayman Islands, and the British Virgin Islands.  The Income Collecting Fund’s 

custodian is a bank account located in San Francisco (the “Income Collecting Fund Bank 

Account”), its brokerage account is located in New York City, its investment adviser is located 

in Nevada and/or the Bahamas, and its administrator is located in Ohio.  At relevant times, the 

registered investment adviser for Investor Group A has been located in California and/or Utah, 

and Abarbanel, Chilelli, and other Income Collecting Fund representatives had regular 

communications with this investment adviser during the course of the scheme.  On or about June 

21, 2021, shareholders and/or directors of the Income Collecting Fund caused the fund to enter 

into voluntary liquidation in the Cayman Islands, appointed certain individuals to act as Joint 

Voluntary Liquidators, and subsequently filed a petition to make the liquidation subject to the 

supervision of the Grand Court of the Cayman Islands.  On or about October 11, 2021, the Grand 

Court of the Cayman Islands declined to appoint the Joint Voluntary Liquidators as Joint Official 

Liquidators to control the Fund, and instead appointed certain other individuals to act as Joint 

Official Liquidators. 

24. New York Alaska ETF Management LLC (“NY Alaska”) is a Nevada Limited 

Liability Company domiciled and headquartered in Nevada, and was the designated investment 

adviser to State Funds during the period that State Funds operated.  NY Alaska was registered 

with the SEC as an investment adviser from January 2015 to March 2019, when it terminated its 

registration.  Abarbanel was the sole owner of NY Alaska and served as the firm’s Chief 

Executive Officer, Chief Financial Officer, and Chief Compliance Officer.   

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 12 of 66



 

13 

RELIEF DEFENDANTS 

25. As alleged herein, the Relief Defendants received investor funds and/or ill-gotten 

proceeds of the fraudulent scheme alleged herein, subject to disgorgement, for which they gave 

no bona fide consideration and to which they have no legitimate claim. 

26. Institutional Syndication LLC (IS) is a New Jersey Limited Liability Company 

formed by Chilelli on October 31, 2017, domiciled and headquartered in New Jersey.  IS is a 

shell company, formed, controlled, and operated by Abarbanel and Chilelli, at Abarbanel’s 

direction, which they used to enter into unauthorized, uncollateralized lending transactions with 

the Funds, in furtherance of their scheme.  From March 2019 through November 2020, 

Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, 

transferred approximately $2,030,000 of funds invested by Investor Group A into IS accounts.  

During the Relevant Period, IS received other assets that orginated from, and/or are traceable to, 

investors’ deposits into the Funds.  IS has no legitimate claim to those funds.      

27. North American Liquidity Resources LLC (NALR) is a Nevada limited 

liability company, formed by Chilelli on October 17, 2017, domiciled and headquartered in 

Nevada.  NALR is a shell company, formed, controlled, and operated by Abarbanel and Chilelli, 

at Abarbanel’s direction, which they used to enter into unauthorized, uncollateralized lending 

transactions with the Funds, in furtherance of their scheme.  From March 2019 through 

November 2020, Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s 

direction, transferred approximately $102,000,000 of funds invested by Investor Group A into 

NALR accounts.  During the Relevant Period, NALR received other assets that orginated from, 

and/or are traceable to, investors’ deposits into the Funds.  NALR has no legitimate claim to 

those funds.      

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 13 of 66



 

14 

28. Institutional Secured Credit LLC (ISC) is a Nevada limited liability company 

domiciled and headquartered in Nevada.  Abarbanel formed, controlled, and operated ISC.  

Abarbanel, and Chilelli, at his direction, used ISC to hold and transfer proceeds of the fraudulent 

scheme, including Investor Group A’s funds.  In particular, during the Relevant Period, 

Abarbanel used ISC accounts to fund his own lifestyle, including paying his personal credit card 

bills and other personal expenses.  From at least May 2019 through April 2021, Abarbanel, and 

Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least 

$627,000 worth of investors’ assets into ISC accounts.  During the Relevant Period, ISC received 

other assets that orginated from, and/or are traceable to, investors’ deposits into the Funds.  ISC 

has no legitimate claim to those funds.  

29. Growth Income Holdings LLC (GIH) is a Nevada limited liability company 

domiciled and headquartered in Nevada.  Chilelli is the sole owner of GIH.  Abarbanel and 

Chilelli, at his direction, used GIH to hold and transfer proceeds of the fraudulent scheme, 

including Investor Group A’s funds.  From at least April 2019 through January 2021, Abarbanel, 

and Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least 

$9.4 million worth of investors’ assets into GIH accounts.  During the Relevant Period, GIH 

received other assets that orginated from, and/or are traceable to, investors’ deposits into the 

Funds.  GIH has no legitimate claim to those funds.  

30. CLO Market Neutral LLC (CLO) is a Nevada Limited Liability Company 

domiciled and purportedly headquartered in Nevada.  Abarbanel, formed, controlled, and 

operated CLO.  Abarbanel and Chilelli, at his direction, used CLO to hold and transfer proceeds 

of the fraudulent scheme, including Investor Group A’s funds.  From at least May 2019 through 

May 2021, Abarbanel, and Chilelli and the Income Collecting Fund, acting at Abarbanel’s 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 14 of 66



 

15 

direction, transferred at least $700,000 worth of investors’ assets into CLO accounts.  During the 

Relevant Period, CLO received other assets that orginated from, and/or are traceable to, 

investors’ deposits into the Funds.  CLO has no legitimate claim to those funds. 

31. Global EMEA Holdings LLC (EMEA) is a Nevada Limited Liability Company 

domiciled and purportedly headquartered in Nevada.  Abarbanel formed, controlled, and 

operated EMEA.  From at least October 15, 2019 through August 18, 2020, Abarbanel, and 

Chilelli and the Income Collecting Fund, acting at Abarbanel’s direction, transferred at least $1.4 

million of investors’ assets into EMEA accounts.  During the Relevant Period, EMEA received 

other assets that orginated from, and/or are traceable to, investors’ deposits into the Funds.  

EMEA has no legitimate claim to those funds. 

RELATED ENTITIES 

32.   State Funds – Enhanced Ultra-Short Duration Mutual Fund (“State 

Funds”) was an open-end mutual fund registered with the SEC as an investment company 

(ticker symbol STATX), organized as a Delaware statutory trust, and headquartered in Las 

Vegas, Nevada.  Formerly known as “State Trust,” State Funds filed a registration statement on 

Form N-1A that became effective on March 9, 2017 and filed an application for deregistration 

due to liquidation on February 27, 2019. 

FACTUAL ALLEGATIONS 

I. The Domestic Phase—Using State Funds To Engage In Sham Reverse Repos With 
Nominee Shell Companies that Abarbanel Controlled 

A. Abarbanel and NY Alaska Form State Funds and Solicit Investors 

33. On July 19, 2016, Abarbanel filed a registration statement with the SEC for State 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 15 of 66



 

16 

Funds, an open-end mutual fund.2  Abarbanel signed as Trustee, President, CEO, CFO, and 

CCO.  NY Alaska, controlled by Abarbanel, was the registered investment adviser for State 

Funds.  State Funds’ amended registration statement became effective on March 9, 2017.   

34. Abarbanel and NY Alaska then began soliciting investors in State Funds, and 

were successful in doing so.  From March 2017 through February 2019, individual investors and 

groups of investors invested more than $90 million with State Funds, receiving shares in State 

Funds in exchange.  In its fiscal year 2018 Brochure, NY Alaska reported that State Funds had 

$90.5 million in assets under management. 

35. Abarbanel prepared and signed all public SEC filings for State Funds, including 

the registration statements, the prospectus and proxy materials, and the annual, semi-annual, and 

quarterly reports to shareholders (“Public Filings”).  When signatures of the trustees were 

required, Abarbanel signed on the trustees’ behalf, pursuant to a power of attorney.  

B. Abarbanel and NY Alaska Made Misrepresentations and Misleading 
Omissions of Material Facts in State Funds’ Public Filings  
 

36. After forming State Funds, from March 2017 through December 2018, Abarbanel 

directed NY Alaska to issue and file a number of Public Filings with the SEC on behalf of State 

Funds on the SEC’s public database, EDGAR,3 including prospectuses, quarterly and annual 

statements, and other documents that described, among other things, State Funds’ management, 

structure, investment strategy, risk profile, investments, holdings, assets, earnings, dividends, and 

anticipated returns.   

                                                 
2  Open-end mutual funds typically do not limit the number of shares they can offer, and are bought and sold on 
demand.  When an investor purchases shares in an open-end fund, the fund issues those shares, and when the 
investor sells (redeems) shares, they are bought back by the fund.  (See https://www.finra.org/investors/learn-to-
invest/types-investments/investment-funds/mutual-funds). 
 
3  EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, is the primary system for companies 
and others submitting documents under the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust 
Indenture Act of 1939, and the Investment Company Act of 1940.  (See https://www.sec.gov/edgar/about). 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 16 of 66



 

17 

37. The Public Filings contained numerous false and misleading statements and 

omissions of material fact about State Funds and its investments.  A list of these 

misrepresentations is set forth in Appendix A.  Set forth below are representative examples: 

38. On March 7, 2017, Abarbanel directed NY Alaska to issue a form N-1A/A 

registration statement on behalf of State Funds, and published it on EDGAR.  In this registration 

statement, State Funds described its “Principal Investment Strategies” as including: 

In order to enhance income, the Fund intends to enter into securities lending, repurchase 
agreement and/or reverse repurchase agreement transactions that provide the Fund with 
income at either fixed or floating (variable) interest rates and fees. The Fund may lend its 
portfolio of securities to broker/dealers, institutional investors, banks, mutual funds, and 
insurance and/or reinsurance companies located in one of the member countries of The 
Organization for Economic Co-operation and Development (“OECD”). 
 
39. This representation was materially false and misleading.  As set forth further 

herein, State Funds did not lend its portfolio of securities to anyone.  Further, the purported 

Reverse Repo transactions State Funds entered into, as described herein, were with IS and 

NALR, single-member shell LLCs with no operations or assets outside of their dealings with 

State Funds; they were not broker/dealers, institutional investors, banks, mutual funds, or 

insurance/reinsurance companies.  This description of fund counterparties also was rendered 

materially false and misleading by the omission of any disclosure that State Funds’ manager and 

control person, Abarbanel, also controlled IS and NALR, the counterparties to these transactions. 

40. In the same registration statement, Abarbanel and NY Alaska further described 

State Funds’ “Principal Investment Strategy” as:  

Securities lending allows the Fund to retain ownership of the securities loaned and, at the 
same time, earn additional income from fees paid by borrowers.  Loans will be made only 
to parties who have been reviewed and deemed satisfactory by New York Alaska ETF 
Management LLC, the Fund’s investment adviser (the “Adviser”), pursuant to guidelines 
adopted by the Board of Trustees (the “Board” or the “Board of Trustees”) of State Trust 
(the “Trust”) . . . .  
 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 17 of 66



 

18 

41. This representation was rendered materially false and misleading through the 

omission of material conflicts of interest.  First, Abarbanel and NY Alaska did not disclose that 

IS and NALR, the counterparties to State Funds’ purported securities lending, were controlled by 

Abarbanel—the control person for State Funds and NY Alaska.  Second, Abarbanel and NY 

Alaska did not disclose that State Funds’ Board of Trustees was also controlled by Abarbanel, 

who could not exercise independent judgment. 

42. In the same registration statement, Abarbanel and NY Alaska further described 

State Funds’ “Principal Investment Strategy” as:   

Loans will be made only to parties who have been reviewed and deemed satisfactory . . . 
and which provide collateral, which is either (i) 102% cash or (ii) 102%–115% U.S. 
government securities.  The collateral is marked to market daily and, if the value of the 
existing collateral decreases or the value of the securities lent increases, the borrower will 
be required to post additional collateral. 
 
43. This representation was materially false and misleading.  State Funds made loans 

to IS and NALR without receiving any collateral in the form of cash or United States 

government securities.   

44. In the same registration statement, Abarbanel and NY Alaska further described 

State Funds’ “Principal Investment Strategy” as:   

Repurchase transactions involve the purchase of securities with an agreement to resell the 
securities at an agreed-upon price, date and interest payment.  Reverse repurchase 
transactions involve the sale of securities with an agreement to repurchase the securities 
at an agreed-upon price, date and interest payment and have the characteristics of 
borrowing.  Proceeds (collateral) received with respect to reverse repurchase agreements 
include cash, U.S. Treasury securities or debt instruments secured by U.S. Treasury 
securities. 
 
45. This representation was materially false and misleading.  State Funds did not sell 

securities to IS or NALR, and IS and NALR did not sell securities to State Funds.  State Funds 

did not receive cash, Treasuries, or “debt instruments secured by Treasuries” as collateral for the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 18 of 66



 

19 

Reverse Repos.  Although State Funds received purported debt instruments from IS and NALR 

(which Abarbanel falsely characterized as “secured notes” or “secured bonds”) these debt 

instruments were unsecured promissory notes and did not constitute the promised liquid, secure 

collateral. 

46. In the same registration statement, Abarbanel and NY Alaska further described 

State Funds’ “Principal Investment Strategy” as:  “The Fund will earmark or establish a 

segregated account in which it will maintain cash, U.S. Treasury securities or other liquid 

portfolio securities equal in value to its obligations in respect of reverse repurchase agreements.” 

47. This representation was materially false and misleading.  Abarbanel and NY 

Alaska did not cause State Funds to earmark or establish a segregated account to hold cash, 

Treasuries, or other liquid portfolio securities equal in value to its obligations in respect of the 

Reverse Repos.  No such collateral was ever received by State Funds or its custodian. 

48. In the same registration statement, Abarbanel and NY Alaska described State 

Funds’ Fund Distributions, and its Dividends and Distributions policies, as follows: 

FUND DISTRIBUTIONS 
 
The Fund distributes substantially all of its net investment income to shareholders in the 
form of dividends.  The Fund intends to declare and distribute income dividends every 
two weeks to shareholders of record.  In addition, the Fund distributes any net capital 
gains it earns from the sale of portfolio securities to shareholders no less frequently than 
annually.  Net short-term capital gains may be paid more frequently.  Dividend payments 
are made through DTC participants and indirect participants to beneficial owners then of 
record with proceeds received from the Fund.  
 

* * * * 
 
DIVIDENDS AND DISTRIBUTIONS 
 
General Policies 
 
Dividends from net investment income, if any, are declared and paid every two weeks by 
the Fund. Distributions of net realized capital gains, if any, generally are declared and 
paid once a year, but the Trust may make distributions on a more frequent basis for the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 19 of 66



 

20 

Fund to comply with the distribution requirements of the Internal Revenue Code, in all 
events in a manner consistent with the provisions of the 1940 Act.  It is currently 
expected that the Fund will distribute virtually all of its net income (interest less 
expenses) monthly while capital gains distributions will generally occur annually in 
December.  
 
49. These representations were materially false and misleading.  Abarbanel and NY 

Alaska did not cause State Funds to pay or distribute any dividends to investors from net 

investment income, much less on a biweekly, monthly, or even yearly basis.     

50. As detailed in Appendix A, Abarbanel and NY Alaska also caused State Funds to 

make similar materially false and misleading representations about the fund’s investments, 

assets, earnings, income, holdings, dividends, and distributions in other public filings, including 

Forms N-CSR (filed on June 30, 2017, December 31, 2017, June 30, 2018), a Form N-CSR/A 

(filed on December 31, 2018), a Form 485POS (filed on March 29, 2018), and Forms N-Q (filed 

on March 31, 2018 and September 30, 2018).  Each of these filings was submitted to the SEC 

and made available to the public on EDGAR.   

51. Abarbanel and NY Alaska also directed and caused State Funds to make these 

same types of materially false and misleading representations in Fact Sheets posted to State 

Funds’ website between 2017 and 2019, and also emailed to investors.  For example, a “Fact 

Sheet” that Abarbanel directed to be prepared and posted on State Funds’ website on or about 

January 2, 2018—and that Abarbanel separately emailed to prospective investors—stated that, as 

of January 2, 2018, State Funds’ “major holdings” were in U.S. Treasury Bills, amounting to 

74.70% of the fund’s holdings, and in “Overnight Reverse Repo,” representing 23.94% of the 

portfolio.  

52. In addition, the “Fact Sheet” stated that State Funds: 

a. “seeks to provide current income consistent with preservation of capital and daily 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 20 of 6621 

liquidity.”   

b. has “major holdings [in] 3 Month US Treasuries”  

c. “is permitted to enter into fixed/variable interest rate securities lending, 

Repurchase & Reverse Repurchase agreements with banks, broker/dealers, 

institutional investors, institutional investment manager(s), mutual funds, 

insurance and/or reinsurance companies” in order “to increase income.” 

d. engaged in lending transactions as follows: 

Repurchase and Reverse Repurchase transactions – those are transactions 
in which the fund purchases securities as either lender or borrower with 
the agreement to sell them at a higher price at a specific future date. 

Securities Lending transactions – Securities Lending transactions allow a 
Fund to retain ownership of the securities loaned and, at the same time, 
earn additional income from fees paid by borrowers.  (emphasis in 
original) 

e. “receives securities lending collateral which is limited to (i) 102% cash or 

(ii) 102% - 115% US Government Securities.” 

53. These representations were materially false and misleading.  As discussed herein, 

State Funds did not enter into any arms-length secured or collateralized Reverse Repos with 

independent third parties, and State Funds did not receive cash, “US Government Securities,” or 

“excess collateral” to secure its lending activity. 

54. Abarbanel and NY Alaska made additional misrepresentations and omissions of 

material fact in Fact Sheets posted on State Funds’ website about interest payments.  For 

example, in Fact Sheets published on the Fund’s website from 2017 to 2019, Abarbanel told 

State Funds’ investors that the counterparties to the Reverse Repos would make significant 

interest payments, which would enhance State Funds’ investment income.  In reality, however, 

Abarbanel knew, or was reckless in not knowing, that IS and NALR did not have a source of 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 21 of 66



 

22 

income from which to make such payments (absent a big win from his unauthorized risky trading 

strategies, as outlined herein), and that such payments were not being made. 

55. As described herein, given that Abarbanel (i) formed and had control over State 

Funds’ accounts into which assets were deposited, and from which assets were withdrawn; (ii) 

directed the formation of, and controlled the nominee shell companies, IS and NALR, that 

entered into the unauthorized, uncollateralized loan agreements with State Funds; (iii) directed 

the transfer of cash from State Funds to IS and NALR, and also to the other Relief Defendants; 

and (iv) directed and controlled all trading and other activities of the nominee shell companies 

IS, NALR, and the other Relief Defendants, Abarbanel and NY Alaska knew at the time that 

they made all of the above misrepresentations, or were reckless in not knowing, that the 

statements were false and misleading.   

C. Abarbanel and NY Alaska Create Nominee Shell Counterparties IS and 
NALR to Enter into Unauthorized Loan Agreements with State Funds 

 
56. As described above, in State Funds’ Public Filings, Fact Sheets, and other 

documents issued to investors, Abarbanel and NY Alaska represented that State Funds would 

invest primarily in Treasuries, or in Reverse Repos collateralized by Treasuries, entered into with 

independent, well-funded, third parties.  This did not happen.  Instead, Abarbanel and NY Alaska 

directed and caused State Funds to enter into unsecured, uncollateralized loan transactions with 

nominee shell entities that Abarbanel controlled.  And these unsecured, uncollateralized loan 

transactions formed the core of their fraudulent scheme. 

57. Although in early 2017, State Funds initially entered into a handful of Reverse 

Repos with an independent counterparty, those agreements were short-lived.  In or about October 

2017, frustrated that he lacked control over the independent counterparty to State Funds’ Reverse 

Repos, Abarbanel terminated these Reverse Repos with the independent counterparty and 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 22 of 66



 

23 

instructed Chilelli to form two LLCs that Abarbanel could control going forward for the purpose 

of entering into purported Reverse Repos with State Funds.   

58. In December 2017, following Abarbanel’s directive, Chilelli formed IS and 

NALR, which immediately assumed all of the prior Reverse Repos from the independent 

counterparty.   

59. From that point forward, Abarbanel and NY Alaska did not invest State Funds’ 

investors’ assets in Treasuries or Reverse Repos, as they represented and promised.  Instead, 

from late 2017 until early 2019, Abarbanel and NY Alaska transferred investors’ funds to 

accounts in the names of IS and NALR, in exchange for unsecured, uncollateralized loan 

agreements.  The loan agreements were memorialized in the form of boilerplate Global Master 

Repurchase Agreements (“GMRAs”) executed by State Funds and the particular counterparty to 

the transaction, IS or NALR, that Abarbanel caused and directed to be updated for each 

particular loan transaction.  These loan agreements were purportedly secured by a form of 

promissory note that Abarbanel referred to in correspondence with State Fund’s custodian and 

counterparties as “secured bonds” or “secured notes,” although they did not function as either 

secured bonds or secured notes.  They were not collateralized or secured, as indicated in the 

notes, and did not provide the type of liquid, secure collateral promised and represented in the 

Public Filings and Fact Sheets. 

60. Although these unsecured, uncollateralized loan agreements memorialized by the 

GMRAs purported to be Reverse Repos of the type Abarbanel and NY Alaska represented in 

State Funds’ Public Filings, in fact, they were in no meaningful way similar to the promised 

secured, collateralized Reverse Repo transactions.  They differed in at least three fundamental 

ways: 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 23 of 66



 

24 

61. First, the counterparties IS and NALR were not well-funded, independent third 

parties; they were nominee shell companies controlled by Abarbanel and Chilelli (at Abarbanel’s 

direction).  State Funds’ Public Filings disclosed that the fund “may enter into repurchase 

agreements with broker/dealers, institutional investors, institutional investment managers, banks, 

mutual funds, and insurance and/or reinsurance companies.”  Counterparties IS and NALR did 

not fall into any of these categories.  IS and NALR were single-member LLCs formed and 

controlled by Abarbanel and Chilelli with no capitalization, no source of funds other than 

investors’ cash transferred from State Funds, and no other business purpose or activities except 

to be counterparties to State Funds in the unsecured, uncollateralized loan transactions described 

above, and then vehicles for the receipt and transfer of investor cash in other unauthorized 

transactions. 

62. Second, no Reverse Repos, as described in State Funds’ Public Filings, were 

executed.  The Public Filings described the Reverse Repos as follows:  “[T]he Fund enters into a 

contract with a counterparty under which (i) the Fund sells securities for cash or cash equivalents 

to the counterparty, and (ii) the Fund agrees to repurchase the securities at an agreed-upon price, 

date, and interest payment.”  This never happened.  Although State Funds’ schedule of 

investments included a number of purported Reverse Repos, State Funds never sold or 

transferred securities to any counterparty.  Nor did any counterparty ever send cash or cash 

equivalents to State Funds or its custodian.  Rather, State Funds sent cash to IS and NALR, and 

got nothing in return except the unsecured, uncollateralized promissory notes described above.  

63. Third, no collateral was exchanged.  State Funds’ public filings stated that loans 

would only be made to parties who “provide collateral, which is either (i) 102% cash or (ii) 102-

115% U.S. government securities.”  Likewise, the schedules of investments filed by State Funds 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 24 of 66



 

25 

represented that collateral was 102-103% of the amount of the principal for each purported 

Reverse Repo listed, and described the collateral by reference to specific U.S. Treasury Bills and 

their maturation dates.  This never happened.  In reality, there was no collateral exchanged for 

the cash payments that State Funds sent to IS and NALR, and State Funds did not receive cash or 

Treasuries from IS or NALR in exchange for the cash payments, only unsecured promissory 

notes of the type described above.   

64. Abarbanel and NY Alaska’s representations in the Public Filings and Fact Sheets 

concerning secure, liquid collateralization were critical to the investment decisions of investors 

(including Investor Group A, as described below).  A reasonable investor reading the Public 

Filings and Fact Sheets would expect, believe, and understand that the transactions entered into 

by State Funds would be conservative and low-risk because they were secured by unencumbered 

Treasuries in State Funds’ possession, which could be easily liquidated in the event of default.   

65. Investors were deceived and misled by way of the lack of collateral transferred 

back to State Funds in exchange for the tens of millions worth of investors’ deposits that 

Abarbanel and NY Alaska caused to flow to nominee shell companies IS, NALR, and the other 

Relief  Defendants. 

D. Abarbanel Used Investor Funds to Engage in Unauthorized High-Risk 
Trading In The Relief Defendants’ Accounts 

 
66. After (i) causing State Funds to enter into the unauthorized, uncollateralized loan 

transactions with IS and NALR, purporting to be Reverse Repos; and (ii) transferring State 

Funds’ investor deposits into IS and NALR accounts that he controlled, Abarbanel now had 

access to tens of millions of dollars of investor cash with which he could unlawfully speculate 

and gamble, as he saw fit, at no risk to his own personal wealth.   

67. Between March 2017 and February 2019, Abarbanel and Chilelli, under 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 25 of 66



 

26 

Abarbanel’s direction, directed and caused IS and NALR to engage in numerous unauthorized, 

often high-risk securities transactions using State Funds’ investors’ deposits as capital.  These 

unauthorized trading processes generally entailed the following steps: 

68. First, Abarbanel and Chilelli, under his direction, used State Funds’ investor 

assets to establish and fund brokerage accounts in the names of IS and NALR.  The dollars 

transferred to IS and NALR accounts purported to correspond to the amount of funds that State 

Funds “loaned” to IS and NALR as part of the unsecured, uncollateralized loan transactions 

described herein. 

69. Now, having millions of dollars of State Funds’ investors’ cash at his disposal, 

Abarbanel, and Chilelli, under his direction, used the cash to engage in tens of millions of dollars 

worth of unauthorized securities transactions in the name of, and for the benefit of Abarbanel, 

Chilelli, IS, and/or NALR, not State Funds or its investors.  These unauthorized securities 

transactions often were on margin (using funds borrowed from the brokerage firm), transacted in 

margin accounts, and often employed high-risk options and futures strategies.  These volatile, 

high-risk securities transactions, directed and controlled by Abarbanel, were contrary to the 

conservative, secure transactions that Abarbanel and NY Alaska described and promised that 

State Funds would enter into in the Public Filings and Fact Sheets, as described above.   

70. In essence, Abarbanel’s plan (in both the Domestic Phase and Offshore Phase) 

involved using investors’ assets as “house money” with which to speculate and gamble.  If 

Abarbanel “won” his bets using investor funds, and his high-risk trades were successful, he could 

cover the interest owed in the underlying loan transactions that State Funds entered into with IS 

and NALR, with potentially extra for himself to spare; and if he “lost,” which was the case, as 

described herein, he could (and did) try to hide his losses by various methods, including by 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 26 of 66



 

27 

rolling over the loan agreements, buying time until his high-risk, high-reward trades might 

possibly cover accrued losses.  Eventually, when time ran out, Abarbanel resorted to the age-old 

Ponzi-scheme-like method of hiding his losses by using new investor deposits to pay off old 

investors who sought to redeem. 

71. In addition to these high-risk trades made in IS and NALR accounts, Abarbanel 

and Chilelli, at Abarbanel’s direction, also transferred investor funds from IS and NALR 

accounts to different bank and brokerage accounts in the names of the other Relief Defendant 

LLCs, as well as other entities that Abarbanel and Chilelli formed, controlled, and/or operated.   

72. From these other nominee accounts, Abarbanel and Chilelli, at Abarbanel’s 

direction, again entered into similar high-risk securities transactions, again, often on margin, and 

again, often employing high-risk options and futures strategies for the benefit of Abarbanel, 

Chilelli, and the Relief Defendants, not State Funds or its investors. 

73. In purported documentation of the Reverse Repos, Abarbanel and Chilelli, at 

Abarbanel’s direction, directed IS and NALR to send original, signed hard copies of the updated 

unsecured promissory notes, described above, to State Funds’ custodian, instructing the 

custodian to preserve the agreements.  As described above, these unsecured promissory notes 

were the only purported collateral provided to State Funds in exchange for the cash payments 

transferred to IS and NALR.  

74. On multiple occasions, including in emails dated October 2018 through February 

2019, Abarbanel directly or indirectly instructed State Funds’ custodian to destroy particular 

promissory notes, asserting that they had been repaid or altered.  Abarbanel’s representations 

concerning repayment of the promissory notes were false; none of the promissory notes had been 

repaid.  Moreover, Abarbanel’s directives to destroy any critical business records such as the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 27 of 66



 

28 

promissory notes were improper, and were done only to further and conceal his fraudulent 

scheme. 

75. In the end, Abarbanel’s hopes that his high-risk trading strategies would yield 

sufficient profits, from which IS and NALR could make promised interest payments, did not 

come to fruition.  Instead, his trading in IS’s and NALR’s accounts, using investor assets, 

generated millions of dollars in losses.  For example, in calendar year 2018, tax records for IS 

and NALR indicate that they lost nearly $7 million from unsuccessful trading. 

76. Because of the significant losses incurred as a result of Abarbanel’s high-risk 

trading, because IS and NALR did not have an independent source of income, and because 

Abarbanel siphoned money out of these accounts for his own uses, IS and NALR were unable to 

repay the unsecured loans made from State Funds.  Instead, Abarbanel and NY Alaska caused 

the Reverse Repos to be repeatedly rolled over, with new expiration dates added, and IS and 

NALR made regular interest payments from the amounts loaned to them by State Funds, 

concealing from investors the inability of IS and NALR to repay the unsecured promissory notes 

exchanged for the cash payments from State Funds. 

77. In December 2018, a Connecticut-based investor contacted Abarbanel to discuss 

the investor’s questions and concerns about the counterparties and Reverse Repos.  Abarbanel 

attempted to allay the investor’s concerns, but—after conducting additional due diligence 

concerning State Funds, IS and NALR, and the collateral (or lack thereof) provided by these 

counterparties—the investor ultimately requested a full redemption of its investment. 

78. Abarbanel had already established the Income Collecting Fund in the Cayman 

Islands at this time.  Shortly after his conversations with the Connecticut-based investor, 

Abarbanel and NY Alaska encouraged all of State Funds’ non-U.S. investors to move their 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 28 of 66



 

29 

investments to the Income Collecting Fund.  Abarbanel and NY Alaska then forcibly redeemed 

all remaining U.S. investors in State Funds, and, in February 2019, filed an application with the 

SEC to de-register State Funds.   

79. At the time Abarbanel forcibly redeemed State Funds’ U.S. investors and moved 

its non-U.S. investors to the Income Collecting Fund, IS and NALR did not have sufficient funds 

to repay the outstanding Reverse Repos with State Funds.  Abarbanel directed and caused IS and 

NALR to enter into new agreements with the Income Collecting Fund.  Abarbanel then used the 

funds received by IS and NALR from the Income Collecting Fund to repay State Funds’ U.S. 

investors in the forced redemptions.  Because Abarbanel used funds invested by the Income 

Collecting Fund’s investors to redeem State Funds’ investors, he ultimately left the Income 

Collecting Fund without sufficient funds to redeem its own investors (namely, Investor Group 

A), as further described below in Section III. 

II. The Offshore Phase—Using the Income Collecting Fund To Engage In Sham 
Reverse Repos With Nominee Shell Companies that Abarbanel Controlled 

 
A. Abarbanel Founded and Used the Income Collecting Fund to Engage in 

Unauthorized, Uncollateralized Loan Agreements 
 
80. In or around March 2018, Abarbanel took steps to register the Income Collecting 

Fund in the Cayman Islands by renaming an exempted company previously incorporated under 

the name “US Bonds Mutual Fund.” 

81. Abarbanel arranged for nominee personnel in the Bahamas and British Virgin 

Islands to serve as directors of the Income Collecting Fund, leaving Abarbanel free to control the 

activities of the Income Collecting Fund without meaningful hindrance or oversight. 

82. Abarbanel controlled all aspects of the Income Collecting Fund.  A March 2020 

letter signed by the fund’s Director and Chairman describes a motion by the Income Collecting 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 29 of 66



 

30 

Fund’s Board “authorizing Mr. Ofer Abarbanel to represent the fund in all matters and that 

Interactive Brokers LLC is allowed to disclos[e] all fund information to Mr. Ofer Abarbanel.” 

83. Chilelli provided substantial assistance to Abarbanel with respect to the offshore 

phase of the scheme.  In particular, Chilelli oversaw the transfer of Income Collecting Fund 

assets to counterparties, IS and NALR, which Chilelli, at Abarbanel’s direction, formed, 

controlled, and operated.   

B. Abarbanel and the Income Collecting Fund Made Materially False and 
Misleading Statements and Omissions in the Income Collecting Fund’s 
Prospectus 

 
84. In approximately January 2019, Abarbanel created a prospectus on behalf of the 

Income Collecting Fund, and issued and/or made it available to investors on the fund’s website 

(www.govbxfund.com).  

85. Investor Group A accessed and reviewed the Income Collecting Fund’s 

prospectus.   

86. Between February 2019 and at least August 2020, on at least 9 occasions 

(including February, March, April, May, June, and July of 2019, and April, July, and August of 

2020), Abarbanel and the Income Collecting Fund issued updates to the prospectus that 

contained minor modifications, and posted the prospectus on the fund website. 

87. As with State Funds’ public filings set forth above, the Income Collecting Fund’s 

prospectus described the fund’s structure, investment strategy, investments, anticipated returns, 

and methods for purchasing and redeeming shares.  The prospectus described the Income 

Collecting Fund’s investment objective as “seek[ing] current income consistent with preservation 

of capital and daily liquidity.”   

88. As Abarbanel and the Income Collecting Fund knew at the time, or were reckless 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 30 of 66



 

31 

in not knowing, this representation was materially false and misleading.  The transfer of funds to 

IS and NALR that they directed and controlled, in uncollateralized, unsecured lending 

transactions, was not consistent with the preservation of capital or daily liquidity. 

89. As with State Funds’ Public Filings, The Income Collecting Fund’s prospectus 

represented that it would invest primarily in Treasuries.  In the description of the Income 

Collecting Fund’s “Principal Investment Strategies,” the prospectus disclosed, in relevant part, 

that “the Fund invests its net assets primarily (exclusive of collateral with respect to securities 

lending and reverse repurchase agreement transactions) in U.S. Treasury securities, which 

include bills, notes, and bonds issued by the U.S. Treasury.”  As Abarbanel and the Income 

Collecting Fund knew at the time, or were reckless in not knowing, this representation was 

materially false and misleading.  The Income Collecting Fund did not invest primarily in 

Treasuries.  In fact, as reported in a year-end 2019 fund report, the Income Collecting Fund’s 

investments comprised only 1 percent Treasuries. 

90. Similar to State Funds’ Public Filings, the Income Collecting Fund’s prospectus 

also stated that it might enter into Reverse Repos.  As stated in the prospectus:  “In order to 

enhance income, the Fund intends to enter into securities lending, repurchase agreements and/or 

reverse repurchase agreement transactions that provide the Fund with income at either fixed or 

floating (variable) interest rates and fees.”  As Abarbanel and the Income Collecting Fund knew 

at the time, or were reckless in not knowing, this representation was materially false and 

misleading.  The Income Collecting Fund did not enter into Reverse Repos with counterparties 

that provided income at fixed or floating interest rates. 

91. The Income Collecting Fund’s prospectus further stated that the fund “may enter 

into repurchase agreements and/or reverse repurchase agreements with counterparties such as:  

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 31 of 66



 

32 

broker/dealers, institutional investors, institutional investment manager(s), banks, mutual funds, 

and insurance and/or reinsurance companies.”  Abarbanel and the Income Collecting Fund knew 

at the time, or were reckless in not knowing, that this statement was materially false and 

misleading.  The counterparties to the purported Reverse Repos into which the Income 

Collecting Fund entered were not independent, well-funded, established institutions such as 

those listed, but, instead, were single-member shell LLCs, formed, controlled, and operated by 

Abarbanel and Chilelli, with no assets, operations, or business purpose other than to facilitate the 

unauthorized investment, transfer and misappropriation of investor funds as described herein. 

92. The Income Collecting Fund prospectus further represented that “Reverse 

repurchase transactions involve the sale of securities with an agreement to repurchase the 

securities at an agreed upon price, date and interest payment,” and that the “proceeds (collateral) 

secured to the Fund with respect to reverse repurchase agreements will include either (1) 100% 

units of mutual fund symbols:  STATX or of this Fund or (2) 102%–115% U.S. Treasury 

securities.”  Abarbanel and the Income Collecting Fund knew at the time, or were reckless in not 

knowing, that this statement was materially false and misleading, because, in practice, the 

purported Reverse Repos with IS and NALR involved neither the lending nor sale of securities 

with an agreement to repurchase the securities at an agreed upon price, date and interest 

payment, nor collateral in the form of mutual fund shares or Treasuries.   

93. Rather, between March 2019 and February 2021, each transaction involved 

sending Investor Group A’s funds to IS or NALR, as directed by Abarbanel, Chilelli, and the 

Income Collecting Fund.  In exchange, the Income Collecting Fund and each counterparty 

executed a boilerplate “Master Securities Loan Agreement,” which the Income Collecting Fund 

sent to the Income Collecting Fund’s custodian.  This exchange of investor funds for unsecured, 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 32 of 66



 

33 

uncollateralized loan agreements did not satisfy the prospectus’ requirement to supply collateral 

in the form of Treasuries or other specified collateral.  

94. In short, as Abarbanel and the Income Collecting Fund knew at the time, or were 

reckless in not knowing, the representations in the prospectus were materially false and 

misleading statements, because:  (a) the MSLA was not a repurchase agreement or reverse 

repurchase agreement as described in the prospectus, or as a reasonable investor would 

understand, (b) the prospectus and other documents issued by Abarbanel and the Income 

Collecting Fund did not correctly describe the actual related-party transactions that Abarbanel, 

Chilelli, and the Income Collecting Fund orchestrated between the Income Collecting Fund and 

counterparties IS and NALR—in that the Income Collecting Fund neither bought nor sold 

securities with an agreement to repurchase the securities at an agreed-upon price, date, and 

interest payment; and the Fund never received collateral in the form of the specified mutual fund 

symbols or Treasuries.  In addition, IS and NALR were single-member shell LLCs with no 

significant assets or business operations, not “broker/dealers, institutional investors, institutional 

investment manager(s), banks, mutual funds, and insurance and/or reinsurance companies.” 

C. Abarbanel and the Income Collecting Fund Made Misrepresentations and 
Misleading Omissions of Material Facts in the Income Collecting Fund’s Fact 
Sheets 

 
95. In addition to the prospectus, Abarbanel also prepared a “Fact Sheet” for the 

Income Collecting Fund, which was updated at Abarbanel’s direction on a monthly basis 

throughout 2019 (March-December), 2020 (January-December), and early 2021 (January, 

February), and to post to the Income Collecting Fund’s website, along with the prospectus. 

96. The Fact Sheet included materially false and misleading representations and 

omissions concerning the Income Collecting Fund’s investment strategy and holdings, similar to 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 33 of 66



 

34 

those in the prospectus.   

97. For example, the Fact Sheet stated that the Income Collecting Fund: 

a. “seeks to provide current income consistent with preservation of capital and daily 

liquidity.”   

b. has “major holdings [in] 3 Month US Treasuries”  

c. “is permitted to enter into fixed/variable interest rate securities lending, 

Repurchase & Reverse Repurchase agreements with banks, broker/dealers, 

institutional investors, institutional investment manager(s), mutual funds, 

insurance and/or reinsurance companies” in order “to increase income.” 

d. engaged in lending transactions as follows: 

Repurchase and Reverse Repurchase transactions – those are transactions 
in which the fund purchases securities as either lender or borrower with 
the agreement to sell them at a higher price at a specific future date. 

Securities Lending transactions – Securities Lending transactions allow a 
Fund to retain ownership of the securities loaned and, at the same time, 
earn additional income from fees paid by borrowers.  (emphasis in 
original) 

98. In addition, as updated throughout 2019, 2020, and early 2021, the Fact Sheet 

variously described the collateral received by the Income Collecting Fund as comprised of 

mutual fund shares, “102%–115%” Treasury securities, and “100% Cash.”  The Fact Sheet 

consistently emphasized that the Income Collecting Fund’s collateral was “marked to market 

daily” to “ensure[] that the fund will always have excess collateral (over-collateralization) to 

secure its activity.”   

99. As Abarbanel and the Income Collecting Fund knew at the time, or were reckless 

in not knowing, these statements in the Fact Sheet were materially false and misleading:  The 

Income Collecting Fund’s “major holdings” were not in Treasuries; the Income Collecting Fund 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 34 of 66



 

35 

did not enter into any arms-length secured or collateralized Reverse Repos with independent 

third parties, as represented; the Income Collecting Fund did not receive collateral consisting of 

mutual fund shares, “102%–115%” Treasury securities, or “100% Cash;” and the Income 

Collecting Fund did not have “excess collateral” to secure its lending activity. 

D. Abarbanel, Chilelli, and the Income Collecting Fund Used IS and NALR to 
Misappropriate, Deplete, and Dissipate Investor Group A’s Assets  

 
100. Investor Group A was the Income Collecting Fund’s largest investor.  From 

March 2019 through February 2021, Investor Group A invested approximately $191 million in 

the Income Collecting Fund, by depositing those funds into the Income Collecting Fund Bank 

Account.  As of June 2021, following its prior redemptions of approximately $85 million, 

Investor Group A had approximately $106 million remaining on deposit with the Income 

Collecting Fund. 

101. Abarbanel and the Income Collecting Fund never invested Investor Group A’s 

funds as promised and represented, as detailed above.   

102. Instead, following Investor Group A’s investment, Abarbanel and the Income 

Collecting Fund immediately transferred at least $104 million worth of Investor Group A’s 

deposits into IS and NALR, which Abarbanel and Chilelli controlled, in exchange for unsecured 

and uncollateralized loan agreements (the Master Securities Loan Agreement) executed by IS 

and NALR.   

103. The IS and NALR Master Securities Loan Agreement transactions in no 

meaningful way supplied the Income Collecting Fund (and Investment Group A) with the secure, 

collateralized investments promised by the prospectus.   

104. IS and NALR, at Abarbanel’s and Chilelli’s direction, then transferred or used the 

investor funds for their own benefit.  Between March 2019 and February 2021, Abarbanel and 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 35 of 66



 

36 

Chilelli (at Abarbanel’s direction) used Investor Group A’s assets transferred from the Income 

Collecting Fund to establish brokerage accounts in the names of IS and NALR.  In the same 

manner as Abarbanel orchestrated in the Domestic Phase, using State Funds’ investors assets, 

Abarbanel and the Income Collecting Fund then repeatedly used Investor Group A’s funds to 

engage in various securities transactions for their own benefit, and not for the benefit of the 

Income Collecting Fund or its investors.  As in the Domestic Phase, these securities transactions 

were often high-risk and volatile, often on margin, and often employed volatile, high-risk 

futures-options trading strategies similar to those Abarbanel employed in the Domestic Phase.   

105. For example, during the time period referred to above, Abarbanel and Chilelli, at 

Abarbanel’s direction, purchased securities in the brokerage accounts of IS and NALR, often on 

margin.  Abarbanel and Chilelli, at Abarbanel’s direction, also transferred funds in these 

accounts to different bank and brokerage accounts that they also controlled, in the name of other 

entities, including the Relief Defendants.  In these other accounts, IS and NALR, again acting 

under the direction and control of Abarbanel and Chilelli, would repeat the process, purchasing 

additional securities and other investments. 

106. The following are examples of Defendants’ misappropriation, depletion, and 

dissipation of Investor Group A’s assets: 

a. On March 5, 2019, Investor Group A wired $20,500,000 into the Income 

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused 

the Income Collecting Fund to transfer $20,500,000 to NALR’s bank account.  

On or about that same day, Abarbanel and Chilelli directed and caused NALR to 

execute a loan agreement with the Income Collecting Fund (the Master Loan 

Servicing Agreement), but did not return any Treasuries or any other form of the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 36 of 66



 

37 

required collateral to the Income Collecting Fund.  On that same day, Abarbanel 

and Chilelli directed and caused the transfer of $20,500,000 from NALR’s bank 

account to NALR’s brokerage account.  From there, Abarbanel and Chilelli 

directed and caused NALR to move $20,500,000 to an affiliated NALR brokerage 

account, and to purchase Treasury securities in approximately that amount.  Those 

securities were held by, and for the benefit of NALR, Abarbanel, and Chilelli, and 

not for the benefit of the Income Collecting Fund or Investor Group A.  Thus, 

they were not pledged, transferred, or assigned to the Income Collecting Fund, 

and were not collateral to the underlying unsecured loan agreement between the 

Fund and NALR. 

b. On June 27, 2019, Investor Group A wired $16,000,000 into the Income 

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused 

the Fund to transfer $16,000,000 to NALR’s bank account.  On or about that same 

day, Abarbanel and Chilelli directed and caused NALR to re-execute the Master 

Loan Services Agreement with the Income Collecting Fund to reflect the 

additional amount, but did not return any Treasuries or any other form of the 

required collateral to the Fund.  On that same day, Abarbanel and Chilelli directed 

and caused the transfer of $16,000,000 from NALR’s bank account to NALR’s 

brokerage account.  From there, Abarbanel and Chilelli directed and caused 

NALR to move $15,998,000 to an affiliated NALR brokerage account and to 

purchase Treasury securities in approximately that amount.  Again, these 

securities were not transferred, pledged, or assigned to the Fund for the benefit of 

the Income Collecting Fund or Investor Group A, and were not collateral to the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 37 of 66



 

38 

underlying unsecured loan agreement between the Income Collecting Fund and 

NALR. 

c. On September 4, 2020, Investor Group A wired $14,000,000 into the Income 

Collecting Fund Bank Account.  On that same day, Abarbanel directed and caused 

the Income Collecting Fund to transfer $14,000,000 to NALR’s bank account.  

On or about that same day, Abarbanel and Chilelli directed and caused NALR to 

re-execute the Master Loan Services Agreement with the Income Collecting Fund 

to reflect the additional amount, but did not return any Treasuries or any other 

form of the required collateral to the Income Collecting Fund.  On that same day, 

Abarbanel and Chilelli directed and caused the transfer of $13,990,000 from 

NALR’s bank account to NALR’s brokerage account.  From there, Abarbanel and 

Chilelli directed and caused NALR to move $13,990,000 to an affiliated NALR 

brokerage account and to purchase Treasury securities in approximately that 

amount.  Again, these securities were not transferred, pledged, or assigned to the 

Income Collecting Fund for the benefit of the Income Collecting Fund or Investor 

Group A, and were not collateral to the underlying unsecured loan agreement 

between the Income Collecting Fund and NALR. 

107. In the transactions detailed above, and the other transactions described herein 

involving assets invested in the Income Collecting Fund by Investment Group A,  Abarbanel, 

Chilelli, and the Income Collecting Fund, acting knowingly or recklessly—by and through 

counterparties IS and NALR that Abarbanel and Chilelli formed, controlled, and operated— 

misappropriated, dissipated, and depleted Investor Group A’s funds by:  (i) failing to invest 

funds in Reverse Repos as required by the prospectus; (ii) failing to provide the collateral 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 38 of 66



 

39 

required by the prospectus to secure Investment Group A’s investments in the Income Collecting 

Fund; and (iii) placing Investor Group A’s funds in IS and NALR’s accounts and using the funds 

for Defendants’ benefit.   

108. In addition, Abarbanel personally misappropriated millions of dollars of investor 

funds, including on or about March 16, 2020 by causing ISC to transfer $5.6 million to NALR 

and then to his own personal accounts. 

III. Abarbanel and the Income Collecting Fund’s Pretextual Response to Investor 
Group A’s Redemption Demands 

A. Abarbanel and the Income Collecting Fund Refused and Failed to Honor 
Investor Group A’s Redemption Demands 

109. In February 2021, Abarbanel became aware of the SEC’s investigation and 

parallel investigations by the U.S. Attorney’s Office for the Southern District of New York and 

the U.S. Office of the Postal Inspector.   

110. When Abarbanel learned of the SEC’s investigation, he took immediate action to 

limit the number of investors in the Income Collecting Fund by forcibly redeeming all of the 

investors in the Income Collecting Fund, except for its largest investor, Investor Group A. 

111. Based on financial records and other documents, Abarbanel and a close family 

member may have been among the investors in the Income Collecting Fund who were redeemed.   

112. Abarbanel did not inform Investor Group A of the SEC’s investigation or offer to 

redeem Investor Group A’s shares of stock in the Income Collecting Fund. 

113. On or around May 21, 2021, Investor Group A independently learned of the 

SEC’s investigation, and requested a full redemption of its shares in the Income Collecting Fund, 

pursuant to the prospectus’ redemption terms.  At the time Investor Group A requested a full 

redemption, its total investment in the Income Collecting Fund was approximately $106 million. 

114. According to the terms of the prospectus, “Fund shares are available for daily 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 39 of 66



 

40 

redemption” (p. 13), “[s]hares will be redeemable at the option of the Shareholder on any 

Business Day and at any amount” (p. 17), and “[a] redemption request must be received by the 

Administrator at least One (1) Business Day (or such lesser period as the Directors may 

generally or in any particular case permits) prior to the relevant Redemption Day” (p. 17).   

115. Investor Group A complied with the prospectus’ redemption requirements.  

116. Despite Investor Group A’s compliance and the prospectus’ provision for “daily 

redemption,” Abarbanel and the Income Collecting Fund did not honor Investor Group A’s 

redemption request.   

117.  Instead, Abarbanel and the Income Collecting Fund obfuscated the facts and set 

up pretextual obstacles and roadblocks to delay and obstruct Investor Group A’s redemption 

request, as follows:     

a. On May 23, 2021, by letter emailed to Investor Group A, Abarbanel and the 

Income Collecting Fund responded to Investor Group A’s redemption request.  

Abarbanel and the Income Collecting Fund stated that Investor Group A’s 

redemption request could not be fulfilled, because Investor Group A must 

undergo an “omnibus review process[],” which would require the Income 

Collecting Fund to appoint a “Money Laundering Compliance officer” and 

“Money Laundering Reporting Officer.”   

b. In subsequent communications with Investor Group A, including on June 1 and 4, 

2021, Abarbanel and the Income Collecting Fund reiterated these and similar 

requirements relating to purported anti-money laundering (“AML”) protocols.   

c. In connection with Investor Group A’s redemption requests before May 2021, 

Abarbanel and the Income Collecting Fund did not mention an “omnibus review 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 40 of 6641 

process,” insist on the appointment of money laundering officers, or impose any 

AML protocols. 

118. On May 27, 2021, Abarbanel and the Income Collecting Fund, provided Investor 

Group A with a presentation, which represented that only a fraction of Investor Group A’s funds 

were available and that a full redemption was not possible.  Abarbanel and the Income Collecting 

Fund asserted that the Income Collecting Fund was holding approximately $88.9 million “sitting 

in cash” ($84 million in a bank in Singapore; and $4.9 million “that can be further transferred to 

the Fund from counterparty”), and an additional $25.9 million in cash and Treasuries “that are 

still invested in lending agreement,” [sic] and not able to be liquidated.  

119. In the May 27, 2021 presentation and during a telephone conversation later that 

day, Abarbanel attempted to persuade Investor Group A to invest in a new investment vehicle set 

up by Abarbanel, under which Investor Group A could redeem its shares in the Income 

Collecting Fund and immediately reinvest its funds with Abarbanel in a different investment 

vehicle, rather than obtaining a full return of its investment in cash.   

120. On May 27, 2021, Investor Group A declined Abarbanel’s offer and again sought 

a full return of its investment funds.  Investor Group A also requested that “this cash be secured 

and no further investments or expenses be undertaken from these funds pending the redemption.”   

121. Abarbanel and the Income Collecting Fund did not comply with Investor Group 

A’s directive.  Instead, later the same day, Abarbanel and the Income Collecting Fund stated that 

Investor Group A must complete a detailed and lengthy (18 page) “Wolfsberg Questionnaire” in 

order for the Income Collecting Fund to fulfill Investor Group A’s redemption request.  

Abarbanel and the Income Collecting Fund did not require completion of this questionnaire in 

connection with Investor Group A’s prior redemption requests. 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 41 of 66



 

42 

122. In subsequent communications with Investor Group A, Abarbanel and the Income 

Collecting Fund imposed additional requirements and conditions for the redemption, including 

demanding a “wet signature,” an itemization of the identity and net worth of beneficial owners 

(including those not in Investor Group A), and other requirements and protocols.  Abarbanel and 

the Income Collecting Fund did not impose these requirements in connection with Investor 

Group A’s prior redemption requests.    

123. Later that evening, Abarbanel and the Income Collecting Fund provided an update 

to Investor Group A, stating that the Singapore bank was in the process of sending $66.9 million 

to the Income Collecting Fund Bank Account, “which currently has a 17M balance.” 

124. The refusal by Abarbanel and the Income Collecting Fund to honor Investor 

Group A’s May 2021 redemption request is in stark contrast to the way in which Abarbanel and 

the Income Collecting Fund engaged with Investor Group A and other investors concerning 

redemption requests before Abarbanel learned of the SEC’s investigation.  For example, on or 

about March 11, 2021, Investor Group A submitted a redemption request for $75 million to the 

Income Collecting Fund by filling out a redemption request form downloaded from the Income 

Collecting Fund’s website.  Within days, Investor Group A received $75 million by wire transfer 

from the Income Collecting Fund.  Abarbanel and the Income Collecting Fund did not require 

completion of an 18-page questionnaire, a wet signature, or compliance with any additional anti-

money laundering protocols before honoring Investor Group A’s redemption request. 

125. During their numerous communications with Investor Group A in connection with 

its May 2021 redemption request, Abarbanel and the Income Collecting Fund did not disclose to 

Investor Group A that IS and NALR were controlled by Abarbanel and Chilelli, and that 

Abarbanel therefore could readily arrange to terminate any lending agreements and effect the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 42 of 66



 

43 

return of $26 million from IS and NALR to the Income Collecting Fund and Investor Group A.  

In fact, such daily liquidity was a requirement of the Income Collecting Fund’s prospectus. 

B. Abarbanel and the Income Collecting Fund Sought to Force Investor Group A 
to Accept Terms That Fell Far Short of a Full Redemption 

 
126. On or about June 1, 2021, Abarbanel and the Income Collecting Fund also 

informed Investor Group A that, to obtain a redemption, it would need to sign a new agreement, 

referred to as “Annex B.”  Under this new agreement, Abarbanel and the fund proposed to satisfy 

Investor Group A’s redemption request by providing Investor Group A with an unspecified 

amount of money held by IS and NALR, along with the “future cash flow” from the Income 

Collecting Fund’s lending agreements with counterparties IS and NALR.   

127. These lending agreements were the Master Securities Loan Agreements into 

which Abarbanel and State Funds entered with IS and NALR, rather than investing in secured 

and collateralized Reverse Repos, as described in the prospectus, which were rolled over to the 

Income Collecting Fund after Abarbanel de-registered State Funds.   

128. In other words, Abarbanel and the Income Collecting Fund misused Investor 

Group A’s funds to obtain the Master Securities Loan Agreements in the first place, and then 

offered to give the proceeds of those unauthorized loan agreements, if any, to Investor Group A 

as part of the package to satisfy Investor Group A’s redemption request.   

129. Under Annex B, as provided to Investor Group A, in exchange for its receipt of 

monies held by IS and NALR and future cash flows, Investor Group A would be required to 

release its claims against the Income Collecting Fund, counterparties IS and NALR, and others.   

130. Abarbanel and the Income Collecting Fund told Investor Group A that Annex B 

reflected a “redemption in kind” under the terms of the Income Collecting Fund’s prospectus.  

This was false.  The Income Collecting Fund’s prospectus provides that the Fund “reserves the 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 43 of 66



 

44 

right to honor requests for redemption or repurchase orders by making payment in whole or in 

part in readily marketable securities (“redemption in kind”) if the amount is greater than 

$200,000 or 1% of the Fund’s assets.” (emphasis added).  The unsecured loan agreements 

between the Income Collecting Fund and IS and NALR that Abarbanel and the Income 

Collecting Fund attempted to require Investor Group A to assume as part of its redemption, are 

not “readily marketable securities,” and therefore are not “redemptions in kind.” 

131. Abarbanel and the Income Collecting Fund also told Investor Group A that they 

were imposing a “forced redemption” under the Income Collecting Fund’s prospectus.  The 

prospectus permits the Income Collecting Fund to impose a “forced redemption.”  Any “forced 

redemption” requires actually redeeming the investor’s shares, however, in exchange for which 

the investor releases its claims.  But that is not what Abarbanel and the Income Collecting Fund 

proposed to do here.  Instead of redeeming Investor Group A’s shares in the Income Collecting 

Fund by offering cash or “readily marketable securities,” Abarbanel and the Income Collecting 

Fund instead offered whatever remained in IS and NALR’s accounts, and whatever future cash 

flows the Master Securities Loan Agreements between the Income Collecting Fund and IS and 

NALR might, in the future, generate.  Moreover, Abarbanel and the Income Collecting Fund 

would only provide that insufficient redemption package if Investor Fund A released all of its 

claims against the Income Collecting Fund, IS, NALR, and others.  

132. In short, rather than complying with their obligation to honor Investor Group A’s 

redemption request, Abarbanel and the Income Collecting Fund sought to coerce Investor Group 

A into relinquishing its shares in the Income Collecting Fund and waiving all claims against the 

Income Collecting Fund and others, in exchange for a package that included IS and NALR’s 

accounts and the cash flow from the same Master Securities Loan Agreements that Abarbanel 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 44 of 66



 

45 

and the Income Collecting Fund entered into by fraudulently using Investor Group A’s funds in 

the first place.   

133. Accordingly, Abarbanel and the Income Collecting Fund violated their 

obligations to honor Investor Group A’s redemption requests and return its investment funds, and 

they have unlawfully withheld such funds. 

C. Abarbanel and the Income Collecting Fund Misappropriated, Depleted, and 
Dissipated Investor Assets in the Income Collecting Fund 

134. Documents obtained by the SEC in May 2021 reveal that IS and NALR’s 

accounts hold less than $4 million, nowhere near the $26 million that Abarbanel and the Income 

Collecting Fund claimed that IS and NALR were holding in the May 27, 2021 presentation.   

135. Documents obtained by the SEC further showed that, in May 2021, the Income 

Collecting Fund Bank Account held approximately $84 million—not the $17 million claimed by 

Abarbanel and the Income Collecting Fund in their May 27 communications with Investor Group 

A.   

136. On June 4, 2021, after receiving Investor Group A’s redemption request, 

Abarbanel and the Income Collecting Fund initiated a transfer of more than $64 million out of 

the Fund’s bank account and into the Income Collecting Fund’s brokerage account.  From this 

account, the funds were vulnerable to unauthorized investment losses, and to further 

misappropriation, depletion, and dissipation by Abarbanel and the Income Collecting Fund. 

137. Abarbanel and the Income Collecting Fund transferred the $64 million without 

notice to Investor Group A and despite the fact that any redemption to Investor Group A would 

need to be processed and transferred from the Income Collecting Fund Bank Account, not the 

brokerage account. 

138. On June 17, 2021, again without notice to investors, Abarbanel caused and 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 45 of 66



 

46 

directed the Fund to transfer $10 million (USD) into a Vanguard account held by Fund counsel 

in an unauthorized transaction.  

139. Accordingly, Abarbanel and the Income Collecting Fund have misused and 

misdirected Investor Group A’s investment funds, and any remaining funds are subject to further 

misappropriation, depletion, or dissipation. 

IV. The Relief Defendants Received Ill-Gotten Gains 

140. Abarbanel, Chilelli, and the Income Collecting Fund diverted Income Collecting 

Fund assets, including assets invested by Investor Group A, into accounts in the names of the 

Relief Defendants—IS, NALR, GIH, CLO, ISC, and EMEA—which Abarbanel and Chilelli 

formed, controlled, and operated.   

141. These assets are ill-gotten gains for which the Relief Defendants gave no bona 

fide consideration and to which they have no legitimate claim.  Therefore, these funds are subject 

to disgorgement.   

142. The following are non-exclusive summary charts of funds transferred into the 

accounts of the Relief Defendants, all of which constitute such ill-gotten gains:   

a. From March 2019 to November 2020, Abarbanel, Chilelli, and the Income 

Collecting Fund transferred at least $102,500,000 (net) of Investor Group A’s 

funds into NALR accounts, and at least $2,030,000 into IS accounts, pursuant to 

the purported lending agreements described herein.  The below table indicates 

Investor Group A’s subscriptions (funds deposited) into the Income Collecting 

Fund Bank Account, Investor Group A’s redemptions (funds withdrawn) from 

that account, and the corresponding immediate transfers of these assets to and 

from the NALR and IS accounts:  

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 46 of 66



 

47 

Investment/ 
Redemption 
Date 

Amount Deposited in/ 
Withdrawn from 
Income Collecting 
Fund Bank Account 

Counterparty Wire Date Amount Wired to/ 
from Counterparty 

3/5/2019 $ 20,500,000.00 NALR 3/5/2019 $ (20,500,000.00) 
3/15/2019 $ 3,000,000.00  NALR 3/15/2019 $ (3,000,000.00)  
3/21/2019 $ 8,000,000.00 NALR 3/21/2019 $ (8,000,000.00) 
4/24/2019 $ (1,000,000.00) NALR 4/24/2019 $ 1,000,000.00 
5/10/2019 $ 2,000,000.00  NALR 5/10/2019 $ (2,000,000.00)  
6/27/2019 $ 16,000,000.00  NALR 6/27/2019 $ (16,000,000.00)  
8/7/2019 $ 7,500,000.00  NALR 8/7/2019 $ (7,500,000.00)  
10/2/2019 $ 2,500,000.00  NALR 10/2/2019 $ (2,500,000.00)  
1/2/2020 $ 5,000,000.00  NALR 1/2/2020 $ (5,100,000.00)  
1/22/2020 $  (4,000,000.00) NALR 1/22/2020 $  4,000,000.00 
1/28/2020 $  (2,500,000.00) NALR 1/28/2020 $  2,500,000.00 
2/14/2020 $ 3,500,000.00  NALR 2/14/2020 $ (3,500,000.00)  
3/13/2020 $ 9,000,000.00  NALR 3/13/2020 $ (9,000,000.00)  
4/27/2020 $ 5,000,000.00  NALR 4/27/2020 $ (5,000,000.00)  
5/22/2020 $ 2,030,000.00  IS 5/22/2020 $ (2,030,000.00)  
7/27/2020 $ 2,000,000.00  NALR 7/27/2020 $ (2,000,000.00)  
8/12/2020 $ 6,500,000.00  NALR 8/12/2020 $ (6,500,000.00)  
8/18/2020 $ 7,500,000.00  NALR 8/18/2020 $ (7,500,000.00)  
9/4/2020 $ 14,000,000.00  NALR 9/4/2020 $ (14,000,000.00)  
11/17/2020 $  (2,000,000.00) NALR 11/17/2020 $  2,000,000.00 

 
b. From at least April 2019 through January 2021, Abarbanel, Chilelli, and the 

Income Collecting Fund transferred at least $9.4 million from NALR accounts 

into accounts in the name of GIH, by way of the following transfers: 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 47 of 66



 

48 

Date From To Amount 
4/1/2019 NALR GIH $ 500,000.00  
5/15/2019 NALR GIH $ 15,000.00  
6/24/2019 NALR GIH $ 225,000.00  
8/8/2019 NALR GIH $ 6,000,000.00  
1/28/2020 NALR GIH $ 13,500.00  
2/26/2020 NALR GIH $ 10,100.00  
3/16/2020 NALR GIH $ 1,500,000.00  
4/1/2020 NALR GIH $ 14,500.00  
4/13/2020 NALR GIH $ 60,000.00  
4/14/2020 NALR GIH $ 50,000.00  
6/26/2020 NALR GIH $ 14,000.00  
7/21/2020 NALR GIH $ 1,000,000.00  
9/9/2020 NALR GIH $ 14,000.00  
1/4/2021 NALR GIH $ 20,100.00  
  Total: $ 9,436,200.00 

 

c. From at least May 2019 through May 2021, Abarbanel and the Income Collecting 

Fund transferred at least $700,000 into accounts held by CLO, by way of the 

following transfers from Income Collecting Fund accounts: 

Date From To Amount 
5/10/2019 Fund CLO $ 12,000.00  
7/5/2019 Fund CLO $ 16,892.48  
8/8/2019 Fund CLO $ 15,346.14  
9/5/2019 Fund CLO $ 17,224.22  
9/26/2019 Fund CLO $ 1,000.00  
10/1/2019 Fund CLO $ 13,013.61  
10/17/2019 Fund CLO $ 1,500.00  
10/28/2019 Fund CLO $ 16,742.29  
12/3/2019 Fund CLO $ 22,196.97  
1/2/2020 Fund CLO $ 21,769.81  
1/31/2020 Fund CLO $ 22,170.85  

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 48 of 66



 

49 

3/2/2020 Fund CLO $ 21,553.35  
4/1/2020 Fund CLO $ 23,956.66  
4/30/2020 Fund CLO $ 22,717.82  
6/1/2020 Fund CLO $ 25,400.50  
7/1/2020 Fund CLO $ 24,084.55  
8/4/2020 Fund CLO $ 16,616.70  
9/1/2020 Fund CLO $ 25,480.40  
10/1/2020 Fund CLO $ 33,294.86  
11/2/2020 Fund CLO $ 36,353.88  
12/1/2020 Fund CLO $ 33,965.55  
1/4/2021 Fund CLO $ 37,475.70  
2/1/2021 Fund CLO $ 45,818.35  
2/26/2021 Fund CLO $ 45,997.56  
4/2/2021 Fund CLO $ 73,424.80  
4/30/2021 Fund CLO $ 15,000.00  
5/3/2021 Fund CLO $ 10,939.40  
5/24/2021 Fund CLO $ 48,915.26  
  Total: $ 700,851.71 

 

d. From at least May 2019 through April 2, 2021, Abarbanel and the Income 

Collecting Fund transferred at least $627,000 worth of investors’ assets into 

accounts they opened in the name of ISC, by way of the following transfers from 

CLO accounts: 

Date From To Amount 
5/23/2019 CLO ISC $ 11,740.00  
7/8/2019 CLO ISC $ 16,892.48  
8/13/2019 CLO ISC $ 22,380.00  
9/6/2019 CLO ISC $ 17,224.22  
10/10/2019 CLO ISC $ 13,500.00  
10/29/2019 CLO ISC $ 16,742.00  
11/18/2019 CLO ISC $ 2,472.50  
12/3/2019 CLO ISC $ 22,196.97  

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 49 of 66



 

50 

1/8/2020 CLO ISC $ 20,077.00  
2/5/2020 CLO ISC $ 20,400.00  
3/3/2020 CLO ISC $ 21,000.00  
4/1/2020 CLO ISC $ 24,000.00  
5/1/2020 CLO ISC $ 22,000.00  
6/11/2020 CLO ISC $ 27,500.00  
7/1/2020 CLO ISC $ 23,000.00  
8/5/2020 CLO ISC $ 16,620.00  
9/4/2020 CLO ISC $ 25,000.00  
10/2/2020 CLO ISC $ 32,500.00  
11/2/2020 CLO ISC $ 36,000.00  
12/3/2020 CLO ISC $ 37,000.00  
1/4/2021 CLO ISC $ 38,560.00  
2/2/2021 CLO ISC $ 43,000.00  
3/1/2021 CLO ISC $ 49,000.00  
4/2/2021 CLO ISC $ 68,900.00  
  Total: $ 627,705.17 

 
e. From at least October 15, 2019 through August 18, 2020, Abarbanel and the Income 

Collecting Fund transferred at least $1.4 million of investors’ assets into accounts 

they opened in the name of EMEA, by way of the following transfers from ISC 

accounts.  These assets originated from, and/or are traceable to, deposits made by 

investors in State Funds and the Income Collecting Fund during the Relevant 

Period: 

 

 

 

 

 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 50 of 66



 

51 

Date From To Amount 
10/15/2019 ISC EMEA $ 150,000.00 
11/19/2019 ISC EMEA $ 15,000.00 
11/20/2019 ISC EMEA $ 2,958.00 
11/20/2019 ISC EMEA $ 2,000.00 
1/6/2020 ISC EMEA $ 230,000.00 
5/8/2020 ISC EMEA $ 5,000.00 
8/18/2020 ISC EMEA $ 1,000,000.00 
  Total: $ 1,404,958.00 

 

143. During the Relevant Period, the Relief Defendants received other assets, in 

addition to the above, that originated from, and/or are traceable to, investors in State Funds and 

the Income Collecting Fund that are subject to disgorgement. 

CLAIMS FOR RELIEF 

COUNT I 

Against Abarbanel, Chilelli, NY Alaska, and the  
Income Collecting Fund for Violations of Section 17(a) of the Securities Act 

[15 U.S.C. § 77q(a)] 
 

144. The SEC realleges and incorporates by reference paragraphs 1 through 143. 

145. By engaging in the acts and conduct alleged above, Abarbanel, NY Alaska, and 

the Income Collecting Fund each directly or indirectly, in the offer or sale of securities, by use of 

the means or instruments of transportation or communication in interstate commerce or by use of 

the mails, (a) knowingly or recklessly employed devices, schemes, or artifices to defraud; (b) 

with negligence, obtained money or property by means of untrue statements of material fact or 

by omitting to state material facts necessary in order to make statements made, in the light of the 

circumstances under which they were made, not misleading; and (c) with negligence, engaged in 

transactions, practices, or courses of business which operated or would operate as a fraud or 

deceit upon the purchasers, in violation of Sections 17(a)(1), (2) and (3) of the Securities Act [15 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 51 of 66



 

52 

U.S.C. § 77q(a)(1), (2) and (3)]. 

146. By engaging in the acts and conduct alleged above, Chilelli directly or indirectly, 

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

communication in interstate commerce or by use of the mails, (a) knowingly or recklessly 

employed devices, schemes, or artifices to defraud with scienter; and (b) with negligence, 

engaged in transactions, practices, or courses of business which operated or would operate as a 

fraud or deceit upon the purchasers, in violation of Sections 17(a)(1) and (3) of the Securities Act 

[15 U.S.C. § 77q(a)(1) and (3)]. 

147. By reason of the foregoing, Defendants violated and, unless restrained and 

enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

COUNT II 

Against Abarbanel, Chilelli, NY Alaska, and the Income Collecting Fund for  
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

[15 U.S.C. § 78q(b), 17 C.F.R. § 240.10b-5] 

148.  The SEC realleges and incorporates by reference paragraphs 1 through 147. 

149. By engaging in the acts and conduct alleged above, Abarbanel, NY Alaska, and 

the Income Collecting Fund directly or indirectly, in connection with the purchase or sale of 

securities, by the use of means or instrumentalities of interstate commerce, or of the mails, or of 

a facility of a national security exchange, knowingly or recklessly, (a) employed devices, 

schemes, or artifices to defraud; (b) made untrue statements of material fact or omitted to state 

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

under which they were made, not misleading; and (c) engaged in acts, practices, or courses of 

business which operated or would operate as a fraud or deceit upon other persons, including 

purchasers and sellers of securities, in violation of Section 10(b) of the Exchange Act [15 U.S.C. 

§ 78j(b)] and subsections (a), (b) and (c) of Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5(a), (b) 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 52 of 66



 

53 

and (c)]. 

150. By engaging in the acts and conduct alleged above, Chilelli directly or indirectly, 

in connection with the purchase or sale of securities, by the use of means or instrumentalities of 

interstate commerce, or of the mails, or of a facility of a national security exchange, knowingly 

or recklessly, (a) employed devices, schemes, or artifices to defraud; and (b) engaged in acts, 

practices, or courses of business which operated or would operate as a fraud or deceit upon other 

persons, including purchasers and sellers of securities, in violation of Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and subsections (a) and (c) of Rule 10b-5 thereunder [17 

C.F.R. § 240.10b-5(a) and (c)]. 

151. By reason of the foregoing, Defendants violated, and unless restrained and 

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]. 

COUNT III 

Against Abarbanel and Chilelli for Aiding and Abetting  
Violations of Section 17(a) of the Securities Act  

 
152. The SEC realleges and incorporates by reference paragraphs 1 through 151. 

153. By engaging in the acts and conduct alleged above, Abarbanel, Chilelli, NY 

Alaska, and the Income Collecting Fund violated Section 17(a) of the Securities Act [15 U.S.C. 

§ 77q(a)]. 

154. By engaging in the acts and conduct alleged above, Abarbanel and Chilelli 

knowingly or recklessly provided substantial assistance, and aided and abetted, each other, NY 

Alaska, and the Income Collecting Fund in their violations of Section 17(a) of the Securities Act 

[15 U.S.C. § 77q(a)].   

155. Accordingly, pursuant to Section 15(b) of the Securities Act [15 U.S.C. § 77o(b)], 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 53 of 66



 

54 

Abarbanel and Chilelli are in violation of Section 17(a) of the Securities Act to the same extent 

as each other, NY Alaska, and the Income Collecting Fund.  

156. By reason of the foregoing, Abarbanel and Chilelli are liable for aiding and 

abetting the aforesaid violations, and unless restrained and enjoined will continue to commit such 

violations.    

COUNT IV 

Against Abarbanel and Chilelli for Aiding and Abetting Violations of  
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] 
 

157. The SEC realleges and incorporates by reference paragraphs 1 through 156. 

158. By engaging in the acts and conduct alleged above, Abarbanel, Chilelli, NY 

Alaska, and the Income Collecting Fund violated 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]. 

159. By engaging in the acts and conduct alleged above, Abarbanel and Chilelli 

knowingly or recklessly provided substantial assistance to, and aided and abetted, each other, NY 

Alaska, and the Income Collecting Fund in their violations of 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].   

160. Accordingly, pursuant to Section 20(e) of the Exchange Act [15 U.S.C. § 78t(e)], 

Abarbanel and Chilelli are in violation of Section 10(b) of the Exchange Act and Rule 10b-5 

thereunder to the same extent as each other, NY Alaska, and the Income Collecting Fund.   

161. By reason of the foregoing, Abarbanel and Chilelli are liable for aiding and 

abetting the aforesaid violations, and unless restrained and enjoined will continue to commit such 

violations.  

 

 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 54 of 66



 

55 

COUNT V 

Against Abarbanel for Control-Person Liability for Violations of 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].  

 
162. The SEC realleges and incorporates by reference paragraphs 1 through 161. 

163. By engaging in the acts and conduct alleged above, NY Alaska and the Income 

Collecting Fund, through the actions of, and under the control of Abarbanel, violated 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]. 

164. By reason of the conduct described above, and pursuant to Section 20(a) of the 

Exchange Act [15 U.S.C. § 78t(a)], Abarbanel is liable for NY Alaska’s and the Income 

Collecting Fund’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as 

set forth above, in that he exercised actual power and control over NY Alaska and the Income 

Collecting Fund and was a culpable participant in the violations by these entities.  

165. Abarbanel did not act in good faith, and he induced, directly or indirectly, the acts 

and conduct of NY Alaska and the Income Collecting Fund that violated the federal securities 

laws, as alleged herein. 

166. By reason of the foregoing, Abarbanel is liable to the same extent as NY Alaska 

and the Incoming Collecting Fund, and unless restrained and enjoined will continue to do so. 

COUNT VI 

Against Abarbanel and NY Alaska for Violations of 
Section 206(1) of the Investment Advisers Act [15 U.S.C. § 80b-6(1)] 

 
167. The SEC realleges and incorporates by reference paragraphs 1 through 166. 

168. By engaging in the acts and conduct set forth herein, Abarbanel and NY Alaska 

were acting as investment advisers to State Funds within the meaning of Section 202(a)(11) of 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 55 of 66



 

56 

the Advisers Act [15 U.S.C. § 80b-2(a)(11)] because they were persons who, for compensation, 

engaged in the business of advising others, either directly or through publications or writings, as 

to the value of securities or as to the advisability of investing in, purchasing, or selling securities.  

169. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska 

directly or indirectly, singularly or in concert, by use of the mails or means and instrumentalities 

of interstate commerce, while acting as investment advisers, willfully engaged in transactions, 

practices, or courses of business which operated as a fraud or deceit upon any client or 

prospective client.  

170. As investment advisers, Abarbanel and NY Alaska owed State Funds’ investors a 

fiduciary duty of utmost good faith and had an affirmative duty to make full and fair disclosure 

to investors of all material facts, as well as the duty to act in State Funds’ best interests, and not 

act in their own interests to the detriment of State Funds and its investors.  

171. Abarbanel and NY Alaska breached their fiduciary duties to State Funds and 

engaged in fraudulent conduct that violated Section 206(1) of the Advisers Act [15 U.S.C. § 80b-

6(1)] by, among other ways as alleged herein, knowingly or recklessly making misstatements 

and omissions of material fact; causing State Funds to enter into unsecured unauthorized lending 

transactions with IS and NALR, counterparties that Abarbanel controlled; making unauthorized 

transfers of State Funds’ assets to accounts that Abarbanel and NY Alaska controlled; engaging 

in securities transactions that benefitted Abarbanel and NY Alaska and not State Funds; 

misappropriating millions of dollars of investors’ money; and failing to disclose conflicts of 

interests with State Funds that Abarbanel and NY Alaska created and from which they profited. 

172. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless 

enjoined will again violate, Section 206(1) of the Advisers Act [15 U.S.C. § 80b-6(1)].  

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 56 of 66



 

57 

COUNT VII 
 

Against Abarbanel and NY Alaska for Violations of  
Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(2)] 

173. The SEC realleges and incorporates by reference paragraphs 1 through 172. 

174. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska, 

directly or indirectly, singularly or in concert, by use of the mails or means and instrumentalities 

of interstate commerce, while acting as investment advisers, willfully engaged in transactions, 

practices, or courses of business which operated as a fraud or deceit upon any client or 

prospective client.  

175. As investment advisers, Abarbanel and NY Alaska owed State Funds a fiduciary 

duty of utmost good faith and had an affirmative duty to make full and fair disclosure to 

investors of all material facts, as well as the duty to act in State Funds’ best interests, and not act 

in their own interests to the detriment of State Funds.  

176. Abarbanel and NY Alaska breached their fiduciary duties to State Funds and 

engaged in fraudulent conduct that violated Section 206(2) of the Advisers Act [15 U.S.C. § 80b-

6(2)] by, among other ways as alleged herein, knowingly or recklessly making misstatements 

and omissions of material fact; causing State Funds to enter into unsecured unauthorized lending 

transactions with IS and NALR, counterparties that Abarbanel controlled; making unauthorized 

transfers of investors’ funds to accounts that Abarbanel and NY Alaska controlled; engaging in 

securities transactions that benefitted Abarbanel and NY Alaska and not State Funds; 

misappropriating millions of dollars of investors’ money; failing to disclose conflicts of interests 

with State Funds that Abarbanel and NY Alaska created and from which they profited. 

177. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless 

enjoined will again violate, Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(1)]. 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 57 of 66



 

58 

COUNT VIII 

Against Abarbanel and NY Alaska for Violations of  
Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)]  

and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8(a)] 
 

178. The SEC realleges and incorporates by reference paragraphs 1 through 177. 

179. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska 

were acting as investment advisers to State Funds within the meaning of Section 202(a)(11) of 

the Advisers Act [15 U.S.C. § 80b-2(a)(11)] because they were persons who, for compensation, 

engaged in the business of advising others, either directly or through publications or writings, as 

to the value of securities or as to the advisability of investing in, purchasing, or selling securities.   

180. State Funds was a pooled investment vehicle within the meaning of Rule 206(4)-

8(b) of the Advisers Act [17 C.F.R. § 275.206(4)-8(b)].  It was engaged in, held itself out as 

being engaged primarily, and proposed to engage itself primarily in the business of investing, 

reinvesting, and/or trading in securities, and thus was an investment company as defined in 

Section 3(a) of the Investment Company Act [15 U.S.C. § 80a-3(a)], or would have been an 

investment company under that provision but for the exclusion provided from that definition 

under either Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940 [15 

U.S.C. § 80a-3(c)(1) & (7)].  

181. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska, 

while acting as investment advisers to State Funds, by use of the means and instrumentalities of 

interstate commerce and of the mails, willfully (1) made untrue statements of material fact and 

omitted to state material facts necessary to make statements made, in the light of the 

circumstances under which they were made, not misleading, to investors and prospective 

investors in the pooled investment vehicles; and (2) engaged in acts, practices, and courses of 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 58 of 66



 

59 

business that were fraudulent, deceptive, and manipulative with respect to investors and 

prospective investors in pooled investment vehicles. 

182. By reason of the foregoing, Abarbanel and NY Alaska have violated, and unless 

enjoined will again violate, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)], and Rule 

206(4)-8(a) thereunder [17 C.F.R. § 275.206(4)-8(a)]. 

183. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless 

enjoined will again violate, Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(1)]. 

COUNT IX 
 

Against Abarbanel and NY Alaska for Violations of  
Section 34(b) of the Investment Company Act [15 U.S.C. § 80a-33(b)] 

 
184. The SEC realleges and incorporates by reference paragraphs 1 through 183. 

185. State Funds is an investment company, as defined in Section 3(a)(1)(A) of the 

Investment Company Act [15 U.S.C. § 80a-3(a)(1)(A)] as it is an issuer that is, or that holds 

itself out as, being engaged primarily in the business of investing, reinvesting, or trading in 

securities.  State Funds was registered with the SEC as an investment company subject to the 

provisions of the Investment Company Act.   

186. Section 34(b) of the Investment Company Act makes it unlawful for any person to 

make any untrue statement of a material fact in any registration statement, application, report, 

account, record, or other document filed or transmitted pursuant to this title or the keeping of 

which is required pursuant to Section 31(a), or to omit to state therein any fact necessary in order 

to prevent the statements made therein, in the light of the circumstances under which they were 

made, from being materially misleading. 

187. By engaging in the acts and conduct alleged herein, Abarbanel and NY Alaska, 

acting willfully, made untrue statements of material fact in State Funds’ registration statements, 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 59 of 66



 

60 

prospectuses, reports, accounts, records, and other documents filed or transmitted pursuant to this 

title or the keeping of which is required pursuant to Section 31(a), and omitted to state in those 

documents facts necessary in order to prevent the statements made therein, in the light of the 

circumstances under which they were made, from being materially misleading. 

188. By reason of the foregoing, Abarbanel and NY Alaska violated, and unless 

enjoined will again violate, Section 34(b) of the Investment Company Act [15 U.S.C. § 80a-

33(b)]. 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that this Court enter a judgment: 

I. 

Permanently restraining and enjoining Defendants from, directly or indirectly, violating 

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

Abarbanel and NY Alaska from, directly or indirectly, violating Sections 206(1), (2), and (4) of 

the Advisers Act and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8(a)]; and Section 34(b) 

of the Investment Company Act [15 U.S.C. § 80a-33(b)]. 

II. 

Permanently restraining and enjoining Defendants from, directly or indirectly, 

participating in the issuance, purchase, offer, or sale of any security, including, but not limited to, 

through any entity owned or controlled by Defendants, provided, however, that such injunction 

shall not prevent Defendants Abarbanel and Chilelli from purchasing or selling securities listed 

on a national securities exchange for their own personal accounts; 

 

 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 60 of 6661 

III. 

Ordering Defendants and Relief Defendants to disgorge their ill-gotten gains according to 

proof, plus prejudgment interest thereon; 

IV. 

Ordering Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act 

[15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 209(e) of 

the Advisers Act [15 U.S.C. § 80b-9(e)], and Section 42(e) of the Investment Company Act [15 

U.S. § 80a-41(e)]; and 

V. 

Granting such other and further relief as this Court may deem just, equitable, or 

necessary, including but not limited to the asset freeze, accounting, and ancillary relief requested 

by the SEC. 

JURY DEMAND 

 Plaintiff demands a trial by jury. 

 
Dated:  January 27, 2022          Respectfully submitted, 
 
 
                  
 
 
 
Of counsel: 
 
David A. Becker 
Virginia M. Rosado Desilets 
Gregory C. Padgett 
Alexandra M. Arango 
SECURITIES AND EXCHANGE 
COMMISSION 
100 F Street, N.E. 
Washington, D.C. 20549 

/s/ Paul W. Kisslinger              
Paul W. Kisslinger (PK0764)  
Securities and Exchange Commission 
100 F Street, N.E. 
Washington, D.C. 20549 
(202) 551-4427 (Kisslinger)  
[email protected] 

 
Counsel for Plaintiff Securities and Exchange 
Commission 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 61 of 66



SEC v. Abarbanel, et al. 
APPENDIX A:  MATERIAL MISREPRESENTATIONS IN STATE FUNDS FILINGS 

Date How Published Statement/Omission Why False and/or Misleading 

March 7, 2017 Form N-1A/A Principal Investment Strategies: “In order to enhance 
income, the Fund intends to enter into securities 
lending, repurchase agreement and/or reverse 
repurchase agreement transactions that provide the 
Fund with income at either fixed or floating (variable) 
interest rates and fees. The Fund may lend its portfolio 
of securities to broker/dealers, institutional investors, 
banks, mutual funds, and insurance and/or reinsurance 
companies located in one of the member countries of 
The Organization for Economic Co-operation and 
Development (“OECD”).”  
[Hereinafter Misrepresentation A] 

The Fund did not lend its portfolio of securities to anyone.  
Further, the loans the Fund did make were to single-member 
LLCs with no operations or assets outside of its transactions with 
the Fund; none were broker/dealers, institutional investors, 
banks, mutual funds, and insurance and/or reinsurance 
companies.   Further, this description of potential counterparties 
was rendered misleading by the omission of any disclosure that 
the Fund’s manager and control person also controlled the Fund’s 
counterparties.  
[Hereinafter Explanation A] 

March 7, 2017 Form N-1A/A Principal Investment Strategies: “Securities lending 
allows the Fund to retain ownership of the securities 
loaned and, at the same time, earn additional income 
from fees paid by borrowers. Loans will be made only 
to parties who have been reviewed and deemed 
satisfactory by New York Alaska ETF Management 
LLC, the Fund’s investment adviser (the “Adviser”), 
pursuant to guidelines adopted by the Board of Trustees 
(the “Board” or the “Board of Trustees”) of State Trust 
(the “Trust”) . . . .”  
[Hereinafter Misrepresentation B] 

These representations were rendered misleading by the omission 
of any disclosure that the counter-parties were controlled by 
Abarbanel, control person for the Fund and for the Adviser; and 
by the omission of any disclosure that the Fund’s Board of 
Trustees was controlled by Abarbanel and failed to exercise 
independent judgment.  
[Hereinafter Explanation B] 

March 7, 2017 Form N-1A/A Principal Investment Strategies: “Loans will be made 
only to parties who have been reviewed and deemed 
satisfactory . . . and which provide collateral, which is 
either (i) 102% cash or (ii) 102%-115% U.S. 
government securities. The collateral is marked to 
market daily and, if the value of the existing collateral 
decreases or the value of the securities lent increases, 
the borrower will be required to post additional 
collateral.” [Hereinafter Misrepresentation C] 

The Fund made loans to IS and NALR without receiving any 
collateral in the form of cash or U.S. government securities.   
[Hereinafter Explanation C] 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 62 of 66



 

63 

Date How Published Statement/Omission Why False and/or Misleading 

March 7, 2017 Form N-1A/A “Repurchase transactions involve the purchase of 
securities with an agreement to resell the securities at an 
agreed-upon price, date and interest payment. Reverse 
repurchase transactions involve the sale of securities 
with an agreement to repurchase the securities at an 
agreed-upon price, date and interest payment and have 
the characteristics of borrowing. Proceeds (collateral) 
received with respect to reverse repurchase agreements 
include cash, U.S. Treasury securities or debt 
instruments secured by U.S. Treasury securities.” 
[Hereinafter Misrepresentation D] 

The Fund never sold securities to IS or NALR, nor did IS or 
NALR ever sell securities to State Funds.  
 
The Fund did not receive cash, U.S. Treasury securities, or debt 
instruments secured by U.S. Treasury securities as collateral for 
the reverse repurchase agreements.  While the Fund received 
purported “debt instruments,” referred to by Abarbanel as 
“secured bonds,” they were simply unsecured promissory notes.   
[Hereinafter Explanation D] 

March 7, 2017 Form N-1A/A “The Fund will earmark or establish a segregated 
account in which it will maintain cash, U.S. Treasury 
securities or other liquid portfolio securities equal in 
value to its obligations in respect of reverse repurchase 
agreements.” [Hereinafter Misrepresentation E] 

The Fund did not earmark or establish a segregated account to 
hold cash, U.S. Treasury securities, or other liquid portfolio 
securities equal in value to its obligations in respect of reverse 
repurchase agreements.  No such collateral was ever received by 
the Fund.  [Hereinafter Explanation E] 

June 30, 2017 Form N-CSR “Reverse Repurchase Agreements - The Fund may also 
enter into reverse repurchase agreements with 
counterparties.  In a typical reverse repurchase 
agreement, the Fund enters into a contract with a 
counterparty under which (i) the Fund sells securities 
for cash or cash equivalents to the counterparty, and (ii) 
the Fund agrees to repurchase the securities at an 
agreed-upon price, date and interest payment.” 
[Hereinafter Misrepresentation F] 

The Fund never sold securities to its purported reverse repurchase 
agreement counterparties, nor did the fund receive cash or cash 
equivalents from its reverse repurchase agreement counterparties.  
 
The Fund never repurchased any securities from its 
counterparties.  [Hereinafter Explanation F] 

June 30, 2017 Form N-CSR “While a reverse repurchase agreement has legal 
characteristics of both a sale and a secured transaction, 
economically it functions as a loan from the 
counterparty to the Fund, in which the securities 
purchased by the counterparty serve as collateral for the 
loan. 
Securities received by the Fund through reverse 
repurchase agreements include cash, U.S. Treasury 
securities or debt instruments secured by U.S. Treasury 
securities.” [Hereinafter Misrepresentation G] 

The counterparties to the Fund’s reverse repurchase agreements 
never made a loan to the Fund; to the contrary, the Fund loaned 
money to the counterparties. 
 
The Fund did not receive cash, U.S. Treasury securities, or debt 
instruments secured by U.S. Treasury securities through the 
reverse repurchase agreements.  [Hereinafter Explanation G] 

June 30, 2017 Form N-CSR See Misrepresentation E See Explanation E 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 63 of 66



 

64 

Date How Published Statement/Omission Why False and/or Misleading 

December 31, 2017  Form N-CSR See Misrepresentation F See Explanation F 

December 31, 2017  Form N-CSR See Misrepresentation G See Explanation G 
December 31, 2017  Form N-CSR “There are many existing examples that borrowers earn 

profit in spite of their borrowing activity . . . . In the 
Fund’s case, the fund charges additional fees that turn 
its borrowing activity into profits by charging fees for 
allowing its counterparties to substitute the proceeds 
(collateral) it receives for reasons such as substituting 
collateral durations.”  
[Hereinafter Misrepresentation H] 

The Fund neither borrowed money from its counterparties nor 
sent them collateral that they would have been able to substitute.   
[Hereinafter Explanation H] 

March 29, 2018 Form 485POS See Misrepresentation A See Explanation A 

March 29, 2018 Form 485POS See Misrepresentation B See Explanation B 

March 29, 2018 Form 485POS See Misrepresentation C See Explanation C 
March 29, 2018 Form 485POS See Misrepresentation D See Explanation D 

March 29, 2018 Form 485POS “[T]he Fund will invest over 5% of its assets in reverse 
repurchase agreements in which proceeds (collateral) 
received with respect to reverse repurchase agreements 
will include cash, U.S. Treasury securities or debt 
instruments secured by U.S. Treasury securities.” 
[Hereinafter Misrepresentation I] 

The Fund never received collateral in the form of cash, U.S. 
Treasury securities, or debt instruments secured by U.S. Treasury 
securities. [Hereinafter Explanation I] 

March 29, 2018 Form 485POS See Misrepresentation E See Explanation E 

March 31, 2018 Form N-Q See Misrepresentation E See Explanation E 

March 31, 2018 Form N-Q See Misrepresentation F See Explanation F 

March 31, 2018 Form N-Q See Misrepresentation H See Explanation H 

March 31, 2018 Form N-Q See Misrepresentation G See Explanation G 
March 31, 2018 Form N-Q See Misrepresentation I See Explanation I 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 64 of 66



 

65 

Date How Published Statement/Omission Why False and/or Misleading 

June 30, 2018 Form N-CSR “Collateral is secured by at least 102% of the underlying 
US treasuries:  
U.S Treasury Bill 0.00%, 08/23/18 
U.S Treasury Bill 0.00%, 08/30/18 
U.S Treasury Bill 0.00%, 09/06/18 
U.S Treasury Bill 0.00%, 09/20/18 
U.S Treasury Bill 0.00%, 09/27/18 
U.S Treasury Bill 0.00%, 10/11/18 
U.S Treasury Bill 0.00%, 10/25/18” 

Investors reasonably understood this to mean that the Fund held 
collateral in the form of U.S. Treasury securities in the amount 
and maturation stated in the Form N-CSR.  The Fund never held 
collateral in the form of U.S. Treasury securities. 
 
To the extent this disclosure is intended to convey that the Fund 
held debt instruments that were secured by the T-bills listed in the 
Form N-CSR, this was not only misleading but also false.  The 
purported debt instruments were unsecured.  The T-bills listed 
were held at a brokerage account in the name of, and under the 
complete control of, the counterparties.  In addition, the 
counterparties borrowed against the T-bills, leaving them as 
collateral for margin loans in amounts of approximately 95% of 
the value of the T-bills.  As a result, the T-bills could not have 
secured any debt agreements to the fund, as they were already 
collateralizing the counterparties’ significant margin loans from 
the broker.  None of these facts was disclosed to investors.  
[Hereinafter Explanation J] 

June 30, 2018 Form N-CSR See Misrepresentation F See Explanation F 
June 30, 2018 Form N-CSR See Misrepresentation H See Explanation H 

June 30, 2018 Form N-CSR See Misrepresentation G See Explanation G 

June 30, 2018 Form N-CSR See Misrepresentation I See Explanation I 

June 30, 2018 Form N-CSR See Misrepresentation E See Explanation E 

September 30, 2018 Form N-Q See Misrepresentation E See Explanation E 

September 30, 2018 Form N-Q “Collateral received is secured by at least 102% of the 
following underlying US treasuries: 
U.S Treasury Bill 0.00%, 11/29/18 
U.S Treasury Bill 0.00%, 12/27/18 
U.S Treasury Bill 0.00%, 02/21/19” 

See Explanation J 

September 30, 2018 Form N-Q See Misrepresentation F See Explanation F 
September 30, 2018 Form N-Q See Misrepresentation H See Explanation H 

September 30, 2018 Form N-Q See Misrepresentation G See Explanation G 

September 30, 2018 Form N-Q See Misrepresentation I See Explanation I 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 65 of 66



 

66 

Date How Published Statement/Omission Why False and/or Misleading 

December 31, 2018 Form N-CSR/A “As required by Prospectus, the US Treasuries 
securities that secure the collateral asset received are: 
U.S Treasury Bill 0.00%, 06/20/2019 
U.S Treasury Bill 0.00%, 05/16/2019 
U.S Treasury Bill 0.00%, 07/18/2019 
U.S Treasury Bill 0.00%, 05/09/2019 
U.S Treasury Bill 0.00%, 04/25/2019” 

See Explanation J 

December 31, 2018 Form N-CSR/A See Misrepresentation F  See Explanation F 
December 31, 2018 Form N-CSR/A “In the Fund’s case, the fund collects fee income that 

turn its borrowing activity into profits by charging fees 
for allowing its counterparties to substitute the proceeds 
(collateral) it receives for reasons such as substituting 
collateral durations while the fund conducts daily mark-
to-market price monitoring as well as calculating the 
collateral’s change in dollar value per every increase or 
decrease of 0.01% in yield, such risk management 
calculation is also known as calculating the Dollar 
Value change per every change of one basis point . . . . 
” 

See Explanation H 

December 31, 2018 Form N-CSR/A Offsetting Assets and Liabilities: “The Fund is party to 
Master Repurchase Agreements that govern 
transactions between the Fund and selected 
counterparties. On the Statement of Assets and 
Liabilities, as permitted by US GAAP, the Fund has 
elected to offset the amounts owed to these 
counterparties with the Securities received from the 
same counterparty under the reverse repurchase 
agreements.” 

The Fund neither owed any amounts to the repurchase agreement 
counterparties nor received any securities from those 
counterparties. 

 

        
 

Case 1:21-cv-05429-RA   Document 77   Filed 01/27/22   Page 66 of 66