In re NAVY CAPITAL GREEN

 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6823 / January 14, 2025 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22414 
 
In the Matter of 
 
NAVY CAPITAL GREEN 
MANAGEMENT, LLC 
 
Respondent. 
 
 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT SECTIONS 203(e) AND 203(k) 
OF THE INVESTMENT ADVISERS ACT 
OF 1940, MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS AND 
A CEASE-AND-DESIST ORDER 
   
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against Navy Capital Green Management, LLC (“Respondent” or “Navy 
Capital”).   
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 203(k) of the 
Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a 
Cease-and-Desist Order (“Order”), as set forth below. 
 
 
 
 
 

 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
Summary 
 
1. These proceedings arise out of the failure by Navy Capital, an investment adviser, to 
act in a manner consistent with representations made to prospective and existing investors in private 
funds Navy Capital managed regarding the firm’s anti-money laundering (AML) due diligence 
practices.  
 
2. Between at least October 2018 and January 2022, Navy Capital represented in 
offering and other documents provided to prospective and existing investors in pooled investment 
vehicles that Navy Capital conducted specific AML due diligence on prospective investors and 
ongoing AML due diligence monitoring on existing investors.  In particular, Navy represented that 
it was voluntarily complying with AML due diligence laws that did not apply to investment 
advisers, including the Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”).  Navy Capital’s 
private fund investors included multiple foreign-based entities with opaque beneficial ownership 
and sources of wealth, at least one of which was owned by an individual publicly reported to be 
suspected of being connected to money laundering activities.  Because Navy Capital’s actual AML 
due diligence practices were materially inconsistent with its representations to investors in the 
pooled investment vehicles it managed, Navy Capital violated Section 206(4) of the Advisers Act 
and Rule 206(4)-8 thereunder. 
 
3. Between April 2019 and at least January 2022, while Navy Capital was registered 
with the Commission as an investment adviser, Navy Capital violated Section 206(4) of the 
Advisers Act and Rule 206(4)-7 thereunder because it did not adopt and implement written policies 
and procedures reasonably designed to prevent violations of the Advisers Act and rules thereunder. 
 
Respondent 
 
4. Navy Capital is a New York limited liability company currently operating from 
Westport, Connecticut.  Navy Capital was registered with the Commission as an investment adviser 
from April 26, 2019 to March 27, 2024, when it withdrew its registration and began filing as an 
exempt reporting adviser.  During that period, Navy Capital reported regulatory assets under 
management ranging from about $130.7 million to about $322.2 million.   
 
Other Relevant Entities 
 
5. Navy Capital Green Fund, LP (“Master Fund”), a pooled investment vehicle, is a 
Delaware limited partnership formed on March 8, 2017.  The Master Fund’s General Partner, Navy 
Capital Green Management Partners, LLC, delegated certain operating functions of the Master 
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
other person or entity in this or any other proceeding. 

 
Fund, including responsibility for investing the Master Fund’s capital, to Navy Capital.  On 
November 15, 2024, Navy Capital informed Master Fund investors that it had stopped accepting 
subscribers and was preparing to liquidate the fund’s holdings. 
 
6. Navy Capital Green International, Ltd. (“Feeder Fund”), a pooled investment 
vehicle, is a Cayman Islands exempted company with limited liability, was incorporated on April 
4, 2018, under the laws of the British Virgin Islands (BVI), registered in the Cayman Islands on 
April 2, 2019, and ceased to be registered in the BVI on April 17, 2019.  Under the terms of an 
investment management and advisory agreement, Navy Capital is the manager of the Feeder Fund, 
and made all trading and investment decisions on its behalf.  The Feeder Fund stopped accepting 
subscribers in November 2024. 
 
Navy Capital’s Representations to Fund Investors 
Concerning AML Due Diligence Procedures 
 
7. From at least October 2018 to at least January 2022 (“Relevant Period”), Navy 
Capital represented to prospective and existing investors in Navy Capital’s Master and Feeder 
Funds that it was committed to protecting the fund and investors against money laundering 
activities and associated risks, and, to that end, it conducted AML due diligence on prospective 
investors and ongoing AML due diligence on investors in those funds.  
 
8. During the Relevant Period, Navy Capital distributed offering memoranda to 
prospective Feeder Fund investors representing that it had implemented an AML due diligence 
program “designed to guard against and identify money laundering activities,” and would accept 
investments in the Feeder Fund, including additional investments from existing investors, only 
after confirming the identity of the investor and its principal beneficial owners.  In addition, the 
Feeder Fund’s offering memoranda represented that Navy Capital had to comply with the anti-
money laundering laws and regulations of the jurisdictions where it registered, namely the 
British Virgin Islands (BVI) and, after its reincorporation in April 2019, the Cayman Islands.  
These laws and regulations also required Navy Capital to obtain certified identification 
documentation and detailed personal information about beneficial owners.  Navy Capital also 
represented in the Feeder Fund offering documents that it would undertake “enhanced due 
diligence procedures” before accepting any investment if “high risk factors with respect to 
money laundering activities” were present.   
 
9. Navy Capital’s Master Fund subscription booklets provided to prospective 
investors likewise stated that, “to comply with applicable anti-money laundering laws and 
regulations, the [Master Fund] is required to verify the identities and sources of funds of all 
Investors.”   
 
10. In Due Diligence Questionnaires (DDQs) distributed to prospective investors who 
requested them, Navy Capital stated that it “adopted a written AML policy and established 
procedures to implement the firm’s policy and reviews it to monitor and [e]nsure the policy is 
being observed, implemented properly and amended or updated, as appropriate.”  Navy Capital 
further represented in the DDQs that it “performs its own due diligence into the identities of all 

 
of its potential investors” and “will confirm identity through appropriate identification means (as 
outlined in Navy’s written ‘Customer Identification Program’).” 
 
11. Navy Capital also represented in offering memoranda for the Feeder Fund and 
subscription agreements for the Master and Feeder Funds that, as part of its AML program, it 
required verification of the sources of funds of all investors, and Navy Capital instructed 
prospective investors and existing investors making additional contributions to wire their 
subscription proceeds from accounts held in their own names.  For example, the Feeder Fund’s 
subscription agreement included an “Anti-Money Laundering Supplement” that required 
investors to “wire the [subscription] payment from an account in your name.”  The Master 
Fund’s subscription agreements, including the “Additional Subscription Request” forms, had a 
similar instruction.   
  
12. In the Master Fund and Feeder Fund subscription agreements, Navy Capital listed 
the specific AML documentation Navy Capital required before accepting investments in those 
Funds, including recently verified identification documentation on beneficial owners.  The 
Master Fund and Feeder Fund subscription agreements also made clear that investors must 
submit all required AML documentation before Navy Capital would deem the subscription 
complete.  For example, the “Anti-Money Laundering Supplement” to the Feeder Fund’s 
subscription agreements represented that an investor “will not be deemed a Subscriber of the 
Fund, regardless of whether you have already wired the funds, until all of the required [AML] 
documentation listed below is received by the Fund.”  Similarly, the Master Fund subscription 
agreements advised investors that “[y]our subscription application will not be deemed complete 
until all of the required [AML] documentation listed above is received” and only after 
“verification of your identity[.]”  
 
13. Navy Capital also represented to prospective and existing investors in its April 
2018 and February 2019 Feeder Fund offering memoranda that, although not required by law, it 
had incorporated the requirements imposed on certain financial institutions under the USA 
Patriot Act into its own AML program.  This included the requirement “to confirm the identity of 
each investor to the extent reasonable and practicable, including the principal beneficial owners 
of an investor, if applicable.”  
 
14. Navy Capital’s compliance manual required employees to follow the firm’s AML 
due diligence policies and procedures.  The compliance manual also recognized the potential 
consequences to investors of a failure in the subscription process:  “An oversight in the Investor 
subscription process could jeopardize the safety of Client and Investor assets and/or impair 
Navy’s ability to manage [investor] accounts[.]”  To mitigate these risks, Navy Capital required 
itself and its employees “to act in furtherance of [Navy Capital’s AML] policy statement to 
protect the Adviser from exploitation by money launderers or terrorists” by identifying red flags 
or “other suspicious activities,” such as “acting for an unrepresented principal” and “reluctance 
to provide information about identity, assets, [and] business.”  The compliance manual provided 
that “[a]ny of these red flags” would “prompt further inquiry[.]”  Navy Capital provided its 
compliance manual to prospective investors who requested it, and Navy Capital referred to these 

 
portions of the compliance manual in DDQs provided to certain prospective investors in 2019 
and 2021.   
 
Navy Capital’s Failure to Follow Its Represented AML Due Diligence Procedures 
 
15. Despite these representations to prospective and existing investors, Navy Capital 
did not always conduct the AML due diligence described.  In addition, in some instances where 
red flags or “high risk factors with respect to money laundering activities” were present, Navy 
Capital did not conduct the enhanced AML due diligence it represented it would conduct. 
 
16. In October and November 2018, for example, Navy Capital accepted two Master 
Fund investments from Investor A, a limited liability company.  Despite representing to other 
investors that Navy Capital would not accept investments until it verified the identity of an 
investor’s beneficial owners, Navy Capital did not obtain documents identifying Investor A’s 
beneficial owners.  The only person identified in the six documents constituting Navy Capital’s 
due diligence files on Investor A was Investor A’s president.  And the only identification 
documentation Navy Capital obtained for this individual was an unverified copy of the 
president’s driver’s license issued in December 2022, over four years after Navy Capital 
accepted Investor A’s investment.   
 
17. Between October 2018 and February 2021, Navy Capital accepted three Feeder 
Fund investments from Investor B through a foreign entity Navy Capital knew at the time 
Investor B indirectly owned.  Even though Navy Capital represented it would not accept a 
prospective investment until the investor submitted all required AML documentation, including 
documentation verifying the identities of beneficial owners and sources of subscription funds, 
Navy Capital did not obtain all required AML documentation on Investor B until 2022.  By then, 
Investor B already owned about 65% of the Feeder Fund.  Navy Capital also did not conduct pre-
investment AML due diligence on the entity through which Investor B made these three 
investments, or the entities within the chain of ownership leading to Investor B.  In fact, Navy 
Capital did not know the name of the investing entity until three days after the initial effective 
investment date.  Further, Navy Capital missed red flags in the form of widely-circulated public 
reports of suspicions that Investor B might have been connected to money laundering activities – 
precisely what Navy Capital’s anti-money laundering policies and procedures were supposed to 
address.  Just one week before Investor B’s October 2018 investment, for example, a major 
media outlet reported that a foreign court unsealed confidential police suspicions that Investor 
B’s money was “at least partially of illegal origin” and might have been connected to “money 
laundering.”  Notwithstanding its policy to conduct “enhanced due diligence” if red flags or 
“high risk factors with respect to money laundering activities” were present, Navy Capital did 
not conduct “enhanced due diligence” at that time.  Navy Capital then accepted investments from 
Investor B two more times after the initial investment – in November 2018 and February 2021 – 
without verifying the source of Investor B’s funds.  In March 2022, foreign authorities officially 
sanctioned Investor B and a foreign court imposed an asset freeze on Investor B, which applied 
to Navy’s Feeder Fund because Investor B owned more than 50% of the fund.  Only then did 
Navy Capital collect all required AML documentation for its files on Investor B.  

 
18. Navy Capital accepted an investment from a Master Fund subscriber, Investor C, 
a limited liability limited partnership, even though Investor C provided contradictory documents 
concerning its beneficial ownership.  Specifically, Investor C provided two corporate documents, 
each including a list of 10 limited partners that differed from one another.  Despite representing 
it would confirm and verify the identity of an investor’s beneficial owners before accepting an 
investment, Navy Capital did not obtain documents or information resolving this discrepancy.   
 
19. Navy Capital also accepted funds from bank accounts not held in the name of the 
subscribing investor or without sufficiently confirming the source of funds for the investments, 
which was inconsistent with representations made to investors.  For example, between 
September 2018 and March 2020, Navy Capital accepted three Master Fund investments from 
Investor D, a natural person who signed a subscription agreement in the investor’s personal 
capacity as an investor.  Records for the Master Fund’s bank accounts show that the money 
funding Investor D’s investment did not come from an account held in his own name, but from 
an account held in the name of a trust for which Investor D served as trustee.  For investors that 
were trusts, Master Fund subscription agreements required a certified copy of the trust deed 
detailing the nature and purpose of the trust, where the trust was created, the identity of all 
beneficiaries, settlors, grantors, and protectors of the trust, and verified identification 
documentation of anyone who contributed assets to the trust and at least two 
trustees/controllers.  That the title of the trust used Investor D’s name was not evidence that the 
investor had any beneficial interest in, or contributed assets to, the trust and the money funding 
Investor D’s investment.  Despite its representations that an investor “must wire the payment 
from an account in your name,” Navy Capital accepted the investments without having Investor 
D resend the investment funds from an appropriate account or having the trust submit its own 
subscription agreement and provide detailed documentation that Navy Capital required of trusts. 
 
20. Navy Capital also accepted investments from investors that disclosed on their 
subscription agreements they had zero assets, or without obtaining information about the source 
of the money funding the investment.  For example, Navy Capital accepted an investment in the 
Feeder Fund from Investor E, a privately held corporation, effective January 1, 2022.  Even 
though Navy Capital told investors it would verify the sources of funds for investors’ 
subscriptions, the only document contained in Navy Capital’s files in this regard was an undated 
one-page document containing the words “Investments,” “Business ownership profits,” and 
“Employment income.”  There were no documents in Navy Capital’s file on Investor E 
explaining whose list this was, when it was provided, what the items listed meant, or how they 
related to the sources funding Investor E’s subscription.  
 
21. Although Navy Capital was registered with the Commission as an investment 
adviser during the period from April 26, 2019 to March 27, 2024, it failed to adopt written 
compliance policies and procedures reasonably designed to prevent violations of the Advisers 
Act and the rules thereunder.  For example, during the time period it was registered with the 
Commission as an investment adviser, Navy Capital failed to adopt policies and procedures 
reasonably designed to ensure the accuracy of offering and other documents provided to 
prospective and existing fund investors.   
 

 
 
Violations 
 
22. As a result of the conduct described above, Navy Capital willfully
2
 violated 
Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which make it unlawful for 
any investment adviser to a pooled investment vehicle to “[m]ake any untrue statement of a 
material fact or to omit to state a material fact necessary to make the statements made, in the 
light of the circumstances under which they were made, not misleading, to any investor or 
prospective investor in the pooled investment vehicle; or [o]therwise engage in any act, practice, 
or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or 
prospective investor in the pooled investment vehicle.”  A showing of negligence is sufficient to 
establish a violation of Section 206(4) of the Advisers Act and the rules thereunder; proof of 
scienter is not required.  See SEC v. Steadman, 967 F.2d 636, 647 (D.C. Cir. 1992). 
 
23. As a result of the conduct described above, Respondent willfully violated Section 
206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require a registered investment 
adviser to adopt and implement written compliance policies and procedures reasonably designed 
to prevent violations of the Advisers Act and the rules thereunder. 
 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent’s Offer. 
 
 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 
ORDERED that: 
 
 A. Respondent cease and desist from committing or causing any violations and any 
future violations of Section 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8 thereunder. 
 
B. Respondent is censured.   
 
 C. Respondent shall, within ten (10) days of the entry of this Order, pay a civil money 
penalty in the amount of $150,000 to the Securities and Exchange Commission for transfer to the 
general fund of the United States Treasury, subject to Securities Exchange Act of 1934 Section 
 
2
  “Willfully,” for purposes of imposing relief under Section 203(e) of the Advisers Act, “‘means no more 
than that the person charged with the duty knows what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 
(D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that 
the actor “also be aware that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 
1965).  The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” for purposes 
of a differently structured statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 
2019) (setting forth the showing required to establish that a person has “willfully omit[ted]” material 
information from a required disclosure in violation of Section 207 of the Advisers Act). 
 

 
21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 
§3717. 
   
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Navy Capital as a Respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Tejal D. Shah, Associate 
Regional Director, Division of Enforcement, Securities and Exchange Commission, New York 
Regional Office, 100 Pearl Street, Suite 20-100, New York, NY 10004-2616.   
 
 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 
Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 
the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 
Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
an additional civil penalty and shall not be deemed to change the amount of the civil penalty  
 
 
 
 
 
 
 
 

 
imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 
private damages action brought against Respondent by or on behalf of one or more investors based 
on substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6823 / January 14, 2025 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22414 

 

In the Matter of 

 

NAVY CAPITAL GREEN 

MANAGEMENT, LLC 

 

Respondent. 

 

 

 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT SECTIONS 203(e) AND 203(k) 

OF THE INVESTMENT ADVISERS ACT 

OF 1940, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS AND 

A CEASE-AND-DESIST ORDER 

   

 

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against Navy Capital Green Management, LLC (“Respondent” or “Navy 

Capital”).   

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 203(k) of the 

Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a 

Cease-and-Desist Order (“Order”), as set forth below. 

 

 

 

 

 



 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. These proceedings arise out of the failure by Navy Capital, an investment adviser, to 

act in a manner consistent with representations made to prospective and existing investors in private 

funds Navy Capital managed regarding the firm’s anti-money laundering (AML) due diligence 

practices.  

 

2. Between at least October 2018 and January 2022, Navy Capital represented in 

offering and other documents provided to prospective and existing investors in pooled investment 

vehicles that Navy Capital conducted specific AML due diligence on prospective investors and 

ongoing AML due diligence monitoring on existing investors.  In particular, Navy represented that 

it was voluntarily complying with AML due diligence laws that did not apply to investment 

advisers, including the Uniting and Strengthening America by Providing Appropriate Tools 

Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”).  Navy Capital’s 

private fund investors included multiple foreign-based entities with opaque beneficial ownership 

and sources of wealth, at least one of which was owned by an individual publicly reported to be 

suspected of being connected to money laundering activities.  Because Navy Capital’s actual AML 

due diligence practices were materially inconsistent with its representations to investors in the 

pooled investment vehicles it managed, Navy Capital violated Section 206(4) of the Advisers Act 

and Rule 206(4)-8 thereunder. 

 

3. Between April 2019 and at least January 2022, while Navy Capital was registered 

with the Commission as an investment adviser, Navy Capital violated Section 206(4) of the 

Advisers Act and Rule 206(4)-7 thereunder because it did not adopt and implement written policies 

and procedures reasonably designed to prevent violations of the Advisers Act and rules thereunder. 

 

Respondent 

 

4. Navy Capital is a New York limited liability company currently operating from 

Westport, Connecticut.  Navy Capital was registered with the Commission as an investment adviser 

from April 26, 2019 to March 27, 2024, when it withdrew its registration and began filing as an 

exempt reporting adviser.  During that period, Navy Capital reported regulatory assets under 

management ranging from about $130.7 million to about $322.2 million.   

 

Other Relevant Entities 

 

5. Navy Capital Green Fund, LP (“Master Fund”), a pooled investment vehicle, is a 

Delaware limited partnership formed on March 8, 2017.  The Master Fund’s General Partner, Navy 

Capital Green Management Partners, LLC, delegated certain operating functions of the Master 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 

other person or entity in this or any other proceeding. 



 

Fund, including responsibility for investing the Master Fund’s capital, to Navy Capital.  On 

November 15, 2024, Navy Capital informed Master Fund investors that it had stopped accepting 

subscribers and was preparing to liquidate the fund’s holdings. 

 

6. Navy Capital Green International, Ltd. (“Feeder Fund”), a pooled investment 

vehicle, is a Cayman Islands exempted company with limited liability, was incorporated on April 

4, 2018, under the laws of the British Virgin Islands (BVI), registered in the Cayman Islands on 

April 2, 2019, and ceased to be registered in the BVI on April 17, 2019.  Under the terms of an 

investment management and advisory agreement, Navy Capital is the manager of the Feeder Fund, 

and made all trading and investment decisions on its behalf.  The Feeder Fund stopped accepting 

subscribers in November 2024. 

 

Navy Capital’s Representations to Fund Investors 

Concerning AML Due Diligence Procedures 

 

7. From at least October 2018 to at least January 2022 (“Relevant Period”), Navy 

Capital represented to prospective and existing investors in Navy Capital’s Master and Feeder 

Funds that it was committed to protecting the fund and investors against money laundering 

activities and associated risks, and, to that end, it conducted AML due diligence on prospective 

investors and ongoing AML due diligence on investors in those funds.  

 

8. During the Relevant Period, Navy Capital distributed offering memoranda to 

prospective Feeder Fund investors representing that it had implemented an AML due diligence 

program “designed to guard against and identify money laundering activities,” and would accept 

investments in the Feeder Fund, including additional investments from existing investors, only 

after confirming the identity of the investor and its principal beneficial owners.  In addition, the 

Feeder Fund’s offering memoranda represented that Navy Capital had to comply with the anti-

money laundering laws and regulations of the jurisdictions where it registered, namely the 

British Virgin Islands (BVI) and, after its reincorporation in April 2019, the Cayman Islands.  

These laws and regulations also required Navy Capital to obtain certified identification 

documentation and detailed personal information about beneficial owners.  Navy Capital also 

represented in the Feeder Fund offering documents that it would undertake “enhanced due 

diligence procedures” before accepting any investment if “high risk factors with respect to 

money laundering activities” were present.   

 

9. Navy Capital’s Master Fund subscription booklets provided to prospective 

investors likewise stated that, “to comply with applicable anti-money laundering laws and 

regulations, the [Master Fund] is required to verify the identities and sources of funds of all 

Investors.”   

 

10. In Due Diligence Questionnaires (DDQs) distributed to prospective investors who 

requested them, Navy Capital stated that it “adopted a written AML policy and established 

procedures to implement the firm’s policy and reviews it to monitor and [e]nsure the policy is 

being observed, implemented properly and amended or updated, as appropriate.”  Navy Capital 

further represented in the DDQs that it “performs its own due diligence into the identities of all 



 

of its potential investors” and “will confirm identity through appropriate identification means (as 

outlined in Navy’s written ‘Customer Identification Program’).” 

 

11. Navy Capital also represented in offering memoranda for the Feeder Fund and 

subscription agreements for the Master and Feeder Funds that, as part of its AML program, it 

required verification of the sources of funds of all investors, and Navy Capital instructed 

prospective investors and existing investors making additional contributions to wire their 

subscription proceeds from accounts held in their own names.  For example, the Feeder Fund’s 

subscription agreement included an “Anti-Money Laundering Supplement” that required 

investors to “wire the [subscription] payment from an account in your name.”  The Master 

Fund’s subscription agreements, including the “Additional Subscription Request” forms, had a 

similar instruction.   

  

12. In the Master Fund and Feeder Fund subscription agreements, Navy Capital listed 

the specific AML documentation Navy Capital required before accepting investments in those 

Funds, including recently verified identification documentation on beneficial owners.  The 

Master Fund and Feeder Fund subscription agreements also made clear that investors must 

submit all required AML documentation before Navy Capital would deem the subscription 

complete.  For example, the “Anti-Money Laundering Supplement” to the Feeder Fund’s 

subscription agreements represented that an investor “will not be deemed a Subscriber of the 

Fund, regardless of whether you have already wired the funds, until all of the required [AML] 

documentation listed below is received by the Fund.”  Similarly, the Master Fund subscription 

agreements advised investors that “[y]our subscription application will not be deemed complete 

until all of the required [AML] documentation listed above is received” and only after 

“verification of your identity[.]”  

 

13. Navy Capital also represented to prospective and existing investors in its April 

2018 and February 2019 Feeder Fund offering memoranda that, although not required by law, it 

had incorporated the requirements imposed on certain financial institutions under the USA 

Patriot Act into its own AML program.  This included the requirement “to confirm the identity of 

each investor to the extent reasonable and practicable, including the principal beneficial owners 

of an investor, if applicable.”  

 

14. Navy Capital’s compliance manual required employees to follow the firm’s AML 

due diligence policies and procedures.  The compliance manual also recognized the potential 

consequences to investors of a failure in the subscription process:  “An oversight in the Investor 

subscription process could jeopardize the safety of Client and Investor assets and/or impair 

Navy’s ability to manage [investor] accounts[.]”  To mitigate these risks, Navy Capital required 

itself and its employees “to act in furtherance of [Navy Capital’s AML] policy statement to 

protect the Adviser from exploitation by money launderers or terrorists” by identifying red flags 

or “other suspicious activities,” such as “acting for an unrepresented principal” and “reluctance 

to provide information about identity, assets, [and] business.”  The compliance manual provided 

that “[a]ny of these red flags” would “prompt further inquiry[.]”  Navy Capital provided its 

compliance manual to prospective investors who requested it, and Navy Capital referred to these 



 

portions of the compliance manual in DDQs provided to certain prospective investors in 2019 

and 2021.   

 

Navy Capital’s Failure to Follow Its Represented AML Due Diligence Procedures 

 

15. Despite these representations to prospective and existing investors, Navy Capital 

did not always conduct the AML due diligence described.  In addition, in some instances where 

red flags or “high risk factors with respect to money laundering activities” were present, Navy 

Capital did not conduct the enhanced AML due diligence it represented it would conduct. 

 

16. In October and November 2018, for example, Navy Capital accepted two Master 

Fund investments from Investor A, a limited liability company.  Despite representing to other 

investors that Navy Capital would not accept investments until it verified the identity of an 

investor’s beneficial owners, Navy Capital did not obtain documents identifying Investor A’s 

beneficial owners.  The only person identified in the six documents constituting Navy Capital’s 

due diligence files on Investor A was Investor A’s president.  And the only identification 

documentation Navy Capital obtained for this individual was an unverified copy of the 

president’s driver’s license issued in December 2022, over four years after Navy Capital 

accepted Investor A’s investment.   

 

17. Between October 2018 and February 2021, Navy Capital accepted three Feeder 

Fund investments from Investor B through a foreign entity Navy Capital knew at the time 

Investor B indirectly owned.  Even though Navy Capital represented it would not accept a 

prospective investment until the investor submitted all required AML documentation, including 

documentation verifying the identities of beneficial owners and sources of subscription funds, 

Navy Capital did not obtain all required AML documentation on Investor B until 2022.  By then, 

Investor B already owned about 65% of the Feeder Fund.  Navy Capital also did not conduct pre-

investment AML due diligence on the entity through which Investor B made these three 

investments, or the entities within the chain of ownership leading to Investor B.  In fact, Navy 

Capital did not know the name of the investing entity until three days after the initial effective 

investment date.  Further, Navy Capital missed red flags in the form of widely-circulated public 

reports of suspicions that Investor B might have been connected to money laundering activities – 

precisely what Navy Capital’s anti-money laundering policies and procedures were supposed to 

address.  Just one week before Investor B’s October 2018 investment, for example, a major 

media outlet reported that a foreign court unsealed confidential police suspicions that Investor 

B’s money was “at least partially of illegal origin” and might have been connected to “money 

laundering.”  Notwithstanding its policy to conduct “enhanced due diligence” if red flags or 

“high risk factors with respect to money laundering activities” were present, Navy Capital did 

not conduct “enhanced due diligence” at that time.  Navy Capital then accepted investments from 

Investor B two more times after the initial investment – in November 2018 and February 2021 – 

without verifying the source of Investor B’s funds.  In March 2022, foreign authorities officially 

sanctioned Investor B and a foreign court imposed an asset freeze on Investor B, which applied 

to Navy’s Feeder Fund because Investor B owned more than 50% of the fund.  Only then did 

Navy Capital collect all required AML documentation for its files on Investor B.  



 

18. Navy Capital accepted an investment from a Master Fund subscriber, Investor C, 

a limited liability limited partnership, even though Investor C provided contradictory documents 

concerning its beneficial ownership.  Specifically, Investor C provided two corporate documents, 

each including a list of 10 limited partners that differed from one another.  Despite representing 

it would confirm and verify the identity of an investor’s beneficial owners before accepting an 

investment, Navy Capital did not obtain documents or information resolving this discrepancy.   

 

19. Navy Capital also accepted funds from bank accounts not held in the name of the 

subscribing investor or without sufficiently confirming the source of funds for the investments, 

which was inconsistent with representations made to investors.  For example, between 

September 2018 and March 2020, Navy Capital accepted three Master Fund investments from 

Investor D, a natural person who signed a subscription agreement in the investor’s personal 

capacity as an investor.  Records for the Master Fund’s bank accounts show that the money 

funding Investor D’s investment did not come from an account held in his own name, but from 

an account held in the name of a trust for which Investor D served as trustee.  For investors that 

were trusts, Master Fund subscription agreements required a certified copy of the trust deed 

detailing the nature and purpose of the trust, where the trust was created, the identity of all 

beneficiaries, settlors, grantors, and protectors of the trust, and verified identification 

documentation of anyone who contributed assets to the trust and at least two 

trustees/controllers.  That the title of the trust used Investor D’s name was not evidence that the 

investor had any beneficial interest in, or contributed assets to, the trust and the money funding 

Investor D’s investment.  Despite its representations that an investor “must wire the payment 

from an account in your name,” Navy Capital accepted the investments without having Investor 

D resend the investment funds from an appropriate account or having the trust submit its own 

subscription agreement and provide detailed documentation that Navy Capital required of trusts. 

 

20. Navy Capital also accepted investments from investors that disclosed on their 

subscription agreements they had zero assets, or without obtaining information about the source 

of the money funding the investment.  For example, Navy Capital accepted an investment in the 

Feeder Fund from Investor E, a privately held corporation, effective January 1, 2022.  Even 

though Navy Capital told investors it would verify the sources of funds for investors’ 

subscriptions, the only document contained in Navy Capital’s files in this regard was an undated 

one-page document containing the words “Investments,” “Business ownership profits,” and 

“Employment income.”  There were no documents in Navy Capital’s file on Investor E 

explaining whose list this was, when it was provided, what the items listed meant, or how they 

related to the sources funding Investor E’s subscription.  

 

21. Although Navy Capital was registered with the Commission as an investment 

adviser during the period from April 26, 2019 to March 27, 2024, it failed to adopt written 

compliance policies and procedures reasonably designed to prevent violations of the Advisers 

Act and the rules thereunder.  For example, during the time period it was registered with the 

Commission as an investment adviser, Navy Capital failed to adopt policies and procedures 

reasonably designed to ensure the accuracy of offering and other documents provided to 

prospective and existing fund investors.   

 



 

 

Violations 

 

22. As a result of the conduct described above, Navy Capital willfully2 violated 

Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which make it unlawful for 

any investment adviser to a pooled investment vehicle to “[m]ake any untrue statement of a 

material fact or to omit to state a material fact necessary to make the statements made, in the 

light of the circumstances under which they were made, not misleading, to any investor or 

prospective investor in the pooled investment vehicle; or [o]therwise engage in any act, practice, 

or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or 

prospective investor in the pooled investment vehicle.”  A showing of negligence is sufficient to 

establish a violation of Section 206(4) of the Advisers Act and the rules thereunder; proof of 

scienter is not required.  See SEC v. Steadman, 967 F.2d 636, 647 (D.C. Cir. 1992). 

 

23. As a result of the conduct described above, Respondent willfully violated Section 

206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require a registered investment 

adviser to adopt and implement written compliance policies and procedures reasonably designed 

to prevent violations of the Advisers Act and the rules thereunder. 

 

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent’s Offer. 

 

 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 

ORDERED that: 

 

 A. Respondent cease and desist from committing or causing any violations and any 

future violations of Section 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8 thereunder. 

 

B. Respondent is censured.   

 

 C. Respondent shall, within ten (10) days of the entry of this Order, pay a civil money 

penalty in the amount of $150,000 to the Securities and Exchange Commission for transfer to the 

general fund of the United States Treasury, subject to Securities Exchange Act of 1934 Section 

 
2  “Willfully,” for purposes of imposing relief under Section 203(e) of the Advisers Act, “‘means no more 

than that the person charged with the duty knows what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 

(D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that 

the actor “also be aware that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 

1965).  The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” for purposes 

of a differently structured statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 

2019) (setting forth the showing required to establish that a person has “willfully omit[ted]” material 

information from a required disclosure in violation of Section 207 of the Advisers Act). 
 



 

21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 

§3717. 

   

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Navy Capital as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Tejal D. Shah, Associate 

Regional Director, Division of Enforcement, Securities and Exchange Commission, New York 

Regional Office, 100 Pearl Street, Suite 20-100, New York, NY 10004-2616.   

 

 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 

the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 

Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 

an additional civil penalty and shall not be deemed to change the amount of the civil penalty  

 

 

 

 

 

 

 

 

http://www.sec.gov/about/offices/ofm.htm


 

imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or more investors based 

on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

       Secretary