SEC v. CRETAN KAPUR; and LILABOC, LLC, d/b/a THINKSTRATEGY CAPITAL MANAGEMENT, LLC, Southern District of New York (Dec. 1, 2011) — Complaint

11 
UNITED STATES DISTRICT COURT CW 80 9 4 
SOUTHERN DISTRICT OF NEW YORK 
SECURITIES AND EXCHANGE 

COMMISSION, 
.
.
. 

Plaintiff, 
v. 
Civil Action No. 
___ 
CRETAN KAPUR; 

LILABOC, LLC, d/b/a THINKSTRATEGY : 

CAPITAL MANAGEMENT, LLC, 

Defendants. 
COMPLAINT 

PlaintiffSecurities and Exchange Commission ("Commission") alleges as follows: 

SUMMARY 
1. This action involves a pattern ofdeceptive conduct by unregistered hedge fund 

adviser Lilaboc, LLC d/b/a ThinkStrategy Capital Management, 
LLC ("ThinkStrategy") and its 

sole managing principal, Chetan Kapur. ThinkStrateg}' andKapurmanagedand advised two 

. hedge funds: (i) ThinkStrategy Capital Fund ("Capital Fund"), an equities-trading fund that ceased 
operations 
in 2007; and (ii) TS Multi-Strategy Fund ("Multi-Strategy Fund"), a fund ofhedge 
funds. At its peak in 2008, ThinkStrategy managed approximately $520 million in assets. 
2. Over nearly 
seven years, T.I;1inkStrategy and Kapur misrepresented to their investors 
various information concerning 
the funds' investmentperformance, longevity, assets, and the 
credentials and experience ofThinkStrategy's management team. 
3. 
In addition, with respect to the Multi-Strategy Fund, ThinkStrategy and Kapur 
misstated the scope and quality oftheir due diligence checks on certain managers and funds 
selected 
for inclusion in the hedge fund's portfolio. Although ThinkStrategy and Kapur told 
investors that all funds in the portfolio 
would be selected using a rigorous due diligence process, 
including having reputable service providers, 
they instead selected several funds that failed to meet 

this standard. As a result, the Multi-Strategy Fund made investments in several hedge funds that 
were later revealed to 
be Ponzi schemes or other serious frauds, including Bayou Superfund, 
Valhalla!Victory Funds, and Finvest Primer Fund. Had ThinkStrategy adhered to its stated due 
diligence standards, and required audited financial statements certified 
by bona fide accounting 
firms, the MUlti-Strategy Fund may not have invested detrimentally in those funds. 
4. 
By their conduct alleged herein, Defendants engaged in and, unless restrained and 
enjoined 
by the Court, may continue to engage in, transactions, acts, practices, and courses of 
business that violate Section 17(a) ofthe Securities Ac~of 1933 (the "Securities Act") [15 U.S.C. § 
77q(a)]; Section 1O(b) ofthe Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. § 
78j(b)] and Rule 10b-5 thereunder [17 c.F.R. § 240.lOb-5]; and Section 206(4) ofthe Investment 
Advisers 
Act of 1940 (the "Advisers Act") [15 U.S.C. § 80b-6(4)] and Rille 206(4)-8 thereunder 
[17 C.F.R. 
§ 275.206(4)-8]. 
5. 
The Commission seeks a judgment from the Court: (a) enjoining the Defendants 
from engaging in the transactions, acts, practices, and courses 
ofbusiness alleged in this Complaint 
and transactions, acts, practices, and courses 
ofbusiness ofsimilar purport and object; (b) requiring 
Defendants to disgorge, with prejudgment interest, the illegal profits 
and proceeds they obtained as 
a result 
oftheir actions alleged herein; and ( c) requiring Defendants to pay civil monetary penalties 
pursuant to Section 20(d) 
ofthe Securities Act, Section 21 (d)(3) ofthe Exchange Act, and Section 
209(e) 
ofthe Advisers Act [15 U.S.C. §§ 77t(d), 78u(d)(3), and 80b-9(e)]. 
JURISDICTION' 
6. This Court has jurisdiction over this action pursuant to Sections 20(b), 20( d) and 
22(a) 
ofthe Securities Act, Sections 21(d), 21 (e) and 27 ofthe Exchange Act, and Section 214 of 
the Advisers Act [15 U.S.C. §§ 77t(b), 77t(d), 77v(a), 78u(d), 78u(e), 78aa, and 80b-14]. 
7. The Defendants 
made use ofthe means and instrumentalities ofinterstate 
commerce 
or ofthe mails in connection with the acts, practices, and courses ofbusiness alleged 
herein, certain 
ofwhich occurred within the Southern District ofNew York. Venue is proper in 
2 


this District pursuant to Section 22( a) ofthe Securities Act, Section 27 ofthe Exchange Act, and 
Section 214 
ofthe Advisers Act [15 U.S.c. §§ 77v(a), 78aa, and 80b-14]. 

THE PARTIES 

8. The Plaintiff is the Securities and Exchange Commission, which brings this civil 
. action pursuant to authority conferred 
on it by Section 20(b) ofthe Securities Act, Section 21(d)(I) 
.
ofthe Exchange Act, and Section 209 ofthe Advisers Act [15 U.S.C. §§ 77t(b), 78u(d)(1),and 
80b-9] . 
. 9. Defendant Chetan Kapur, age 
36,is a citizen ofIndia and a resident ofNe.w York. 
He is the founder and sole managing director ofThinkStrategy. 
10. Defendant Lilaboc, LLC d/b/a ThinkStrategy Capital Management, LLC is a 
Delaware limited liability company formed 
in November 2002, with its principal place ofbusiness 
in New York, New York. ThinkStrategy served as general partner and investment adviser to TS 
Multi-Strategy Fund and ThinkStrategy Capital Fund. ThinkStrategy has never been registered 
with the Commission. 
RELATED ENTITIES 
11. ThinkStrategy Capital Fund, L.P. and ThinkStrategy Capital Fund, Ltd. 
(collectively, the "Capital Fund") were sister hedge funds organized 
in an onshore/offshore 
structure in the U.S. and British Virgin Islands, and managed 
by ThinkStrategyfr?m 2003 through 
late.
2007 when it ceased operations. Capital Fund employed an equities trading investment 
. strategy and utilized two share classes, an A class that Kapur traded himself through a series 
of 
brokerage firms ("Capital Fund-A") and a B class in which Kapur allocated capital to three 
different sub-managers ("Capital Fund-B"). Capital Fund was relatively small, with 16 distinct 
investors and $12 million 
or less in assets over its four year history. 
12. TS Multi-Strategy Fund, L.P. and TS Multi-Strategy Fund, Ltd. (collectively, the 
"Multi-Strategy Fund") are sister hedge funds organized in an onshore/offshore structure in the 
U.S. and British Virgin Islands, and managed 
by ThinkStrategy from 2004 until November 2010, 
3 


when the funds entered into voluntary liquidation and were placed under the control ofcourt­
. appointed receivers. Multi-Strategy Fund employed a fund-of-funds strategy 
in which it invested 
. . solely 
in other hedge funds and utilized two share classes, a leveraged A class ("Multi-Strategy 
Fund-A") and an unleveraged B class ("Multi-Strategy Fund-B"). 
At its peak in 2008, Multi­
Strategy Fund had approximately $520 million 
in assets and 90 distinct investors. 
FACTUAL ALLEGATIONS 

Background 

13. Kapur fonned ThinkStrategy in 2002 to serve as investment adviser to a hedge fund. 
he planned to launch. Kapur managed ThinkStrategy himself and was at all times the fum's sole 
managing director and controlling principaL 
14. 
In July 20q3, he fonned Capital Fund, a long-short, market-neutral hedge fund that 
. began trading 
in mid-2003. 
15. 
In mid-2004, Kapur founded a fund ofhedge funds, the Multi-Strategy Fund, which 
began making investments 
in other hedge funds in September 2004 .. 
16. In 2006, Kapur started Capital Fund.::B, a second share class for Capital Fund, 

which allocated capital to three independent sub-advisers who were . authorized to trade the 

account. Capital Fund-B began trading 
in October 2006. 

17. Similarly 
in 2007, Kapur created Multi-Strategy Fund-B, an unleveraged share. 
class 
ofMulti-Strategy Fund that made its first sub-fund investment in January 2008 . 

. Misrepresentations Concerning Performance and Assets 

18. From at least 2003 through mid-2009, ThinkStrategy and Kapur disseminated false 
and materially misleading infonnation to investors concerning the perfonnance, longevity, and 
assets 
ofCapital Fund and Multi-Strategy Fund. 
19. Beginning as early as 2004, ThinkStrategy and Kapur materially overstated Capital 
Fund-A's perfonnance, giving investors the false impression that the fund's track record was 
consistently positive and minimally volatile compared to hedge funds using a similar strategy. 
4 


20. Even though Capital Fund-A had liquidated by late-2006 and ceased all trading by 
early 2008, ThinkStrategy coritinued reporting overstated results for Capital Fund-A through the 
first quarter 
of2009. 
21. ThinkSttategy and Kapur reported these results to current and prospective investors 
through mailings, e-mail, and po stings on commercial hedge fund web sites such as Barclay Hedge, 
Hedgeco, and Morningstar. 
22. ThinkStrategy publicly reported that Capital Fund-A had achieved positive annual 
returns in each year from 2003 through 2008, and double-digit annual returns in four 
ofthose six 
years. 
23. 
ill fact; Capital Fund-A had only one year ofpositive perfonnance from 2003 
. through 2008 and had sustained significant losses 
in several years. 
24. A comparison 
ofth~ annual perfonnance returns reported by ThinkStrategy and the 
actual returns are as follows: 
Table 1: Capital Fund-A, Reported v. Actual Returns (Annual) 
Yi!af-
ThinkStrategy Rel!orted 
Actual­
2003 
6.9% 
-4.2% 
2004 
14.9% 
-15.7% 
2005. 
14.7% 
13.0% 
2006 19.6% 
-25.2% 
2007 
22.6% 
-77.9% 
·2008 
4.6% 
-89.9% 
25. ThinkStrategy's month-to-month reporting ofCapital Fund-A's performance results 
was also false and materially misleading. 
As illustrated by the graph below, Capital Fund-A's 
reported monthly returns from 2004 to 2008 portray the fund as having achieved consistently 
positive 
and smooth returns :with only a few negative months. ill reality, the fund had numerous 
negative months, fell sharply in 
or about June 2006, and never rebounded. 
5 


Figure 1: Capital Fund-A, Reported v. Actual Returns (Monthly) 
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-TSReported 
26. From 2003 to 2006, Capital Fund-A had less than ten investQfs at any given time 
and a relatively small asset value, ranging from a few thousand dollars to as high as $10 million. 
By early 2006, the fund had ceased accepting new investors and the few remaining outside 
investors in Capital Fund-A were mostly 
or fully redeemed. 
27. For the 
nextthree years, however (even beyond the period shown in Figure 1), 
ThinkStrategy and Kapur continued reporting mostly positive returns to investors 
in other 
'ThinkStrategy funds, to prospective investors, and to 
th~ investing public at large. 
28. 
In this way, Kapur was able to market his "successful" record in Capital Fund-A 
and draw investors into Capital Fund-B and the Multi-Strategy Fund. 
29. Kapur 
had sole and ultimate authority for all ofCapital Fund-A's performance 
misrepresentations. The performance returns for Capital Fund-A were calculated and generated 
by 
Kapur himself, without the assistance ofanyone else. Although three different employees handled 
6 


investor communications over the years, Kapur always generated the performance information and 
gave final approval for all postings on commercial hedge fund websites and performance-related 

communications to investors. 

30. ThinkStrategy did 
not use a third party to independently generate or verify Capital 
Fund-A perforniance data. 
D~gits six years ofreporting activity, Capital Fund-A never used an 
outside administrator, custodian, 
or auditor, with one exception. 
31. At the end 
of2003, Capital Fund-A's first year ofoperation, ThinkStrategy 
generated financial statements that were audited 
by an accounting firm. Although these financial 
statements showed that Capital Fund had generated a negative performance return (-4.24%) for 
2003, ThinkStrategy did not provide them to investors. Rather, ThinkStrategy and Kapur reported. 
a positive year-end performance return 
of6.9% for 2003 in marketing materials, investor 
communications, and on commercial hedge fund websites. The discrepancy between the reported 
and audited results was so significant that TIrinkStrategy's director 
ofinvestor relations resigned 
upon discovering it. 
32. ThinkStrategy started the Capital Fund-B share class 
in 2006, based in part on the 
purportedly successful track record 
ofCapital Fund-A. Capital Fund-B employed an equities 
trading strategy using three independent sub-advisers to trade 'on the fund's behalf. 
33. 
IIi July 2007, one ofthe sub-advisors suffered significant trading losses, resulting 
that month 
in a -25% return in the overall fund. Kapur reported the loss accurately to investors in a 
July 2007 newsletter, but assured them that the fund would recover 
by year's end. ThinkStrategy 
and Kapur then reported' steady positive performance for the remainder 
of2007 and a  19.9% return 
in December 2007, purportedly giving the fund a positive, albeit modest, gain for the year. 
ThinkStrategy thereafter quickly wound down Capital Fund-B and redeemed all investors. 
34. 
In fact, Capital Fund-B did not recover from the July 2007 loss through a long-term 
hedge or other skillful trading. Rather, the fund continued losing money from trading throughout 
2007, resulting in an annual 2007 return 
of-31.9%, as set forth below. 
7 


Table 2: Capital Fund-B, Reported v. Actual Returns (Monthly) 
Month 
ThinkStrate~ ReRorted 
Actual 
Jul. 2007 -25.7% -25.6% 
I 
Aug. 2007 0.0% 
-2.4% 
Sep.2007 10.1% 13.1% 
Oct. 2007 
1.5% 
-1.9% 
Nov. 2007 
1.0% 
-18.3% 
Dec. 2007 19.9% 3.1% 
YearEnd 
0.9% -31.9% 
35. ThinkStrategy was able to redeem Capital Fund-B investors, despite the 
undisclosed losses, because the sub-adviser responsible for the July 2007 loss later agreed to 
reimburse the fund approximately 
$1 million. This reimbursement occurred in February 2008, 
many months after Capital Fund-B's purported recovery and rebound in the latter half 
of2007~ 
36. ThinkStrategy's reporting ofCapital Fund-B's performance returns during the last 
five months of2007 was materially inaccurate and gave investors the false .impression that Kapur 
had salvaged the fund through his own trading expertise. 
Longevity and Past Performance of Capital Fund and Multi-Strategy Fund 
37. In a further effort to attract investments, ThinkStrategy and Kapur repeatedly 
deceived investors about the longevity and performance history 
oftheir managed funds. 
38. For example, in marketing materials sent to current and prospective investors, and 
on commercial hedge fund websites, ThinkStrategy claimed that Capital Fund-A began trading in 
January 1998. 
39. ThinkStrategy supported this misrepresentation with a history 
ofpurported monthly 
-returns dating from January 1998 through 
July 2003. 
40. 
In fact, Capital Fund-A did not begin trading until July 2003. 
41. . The impact 
of Capital Fund-A's false inception date and track record was highly 
material, because it gave the appearance that ThinkStrategy and Kapur possessed an additional five 
years 
offund manag~entexperience and successful performance history. 
8 


42. 
ThinkStrategy and Kapur made similar misrepresentations about the inception and 
• 
track record 
ofthe other ThinkStrategy funds. Capital Fund-B only began trading in October 2006, 
yet ThinkStrategy reported actual returns for the fund dating back to January 2006, erroneously 
crediting the fund with an extra nine months 
ofexperience and positive perfonnance. 
43. In addition, Multi-Strategy Fund-A and Multi-Strategy Fund-B began making 
investments in September 2004 
and January 2008, respectively, yet ThinkStrategy reported 
unsupported monthlyperfonnance returns dating back to'January 2003 and January 2007, 
respectively. 
•
44. 
In each case, there was no legitimate or actual fund investment activity to 
corroborate the reported results, 
nor was there a disclaimer in ThinkStrategy's marketing materials 
that returns were based 
on pro fonna, simulated, or model investing. In this way, ThinkStrategy 
and Kapur exaggerated tlIeir experience, creating a more attractive track record for potential 
, , 
investors. Kapur was responsible for generating the historical performance numbers and had 

ultimate authority over all performance-related communications. 

Fund Assets and Firm Assets Under Management 
.' 
" 

45. Throughout the relevant period, ThinkStrategy and Kapur repeatedly inflated 
ThinkStrategy's assets under management 
("AUM")in communications to investors and 
prospective investors. 
46. For example, 
in February 2.009 Kapur represented to an investor that the firm's 
AUM was $600 million, purportedly comprised of$200 million in the Multi-Strategy Fund (which 
was roughly 
a~urate) and an additional $400 million in other managed funds (which was false). 
At that time, ThinkStrategy's only managed fund was the Multi-Strategy Fund, which had 
approximately 
$2.00 million in assets. The Capital Fund account balances had been close to zero 
• • 
for several years. ThinkStrategy and Kapur managed no other funds 
or accounts. 
9 


47. Similarly, in June 2008, at Kapur's direction, 1binkStrategy responded to an 
investor that the 
finn had $100 million in two separate managed accounts. In fact, 1binkStrategy 
and Kapur had no managed accounts aside from the Multi-Strategy Fund at that time. 
48. In addition, in a news article published 
by Institutional Investor, dated April 15, 
2004,at a time when Kapur was attempting to raise new money for the Multi-Strategy Fund, 
Kapur claimed that his other fund, Capital Fund, had $95 million 
in assets. Kapur republished the 
article 
on ThinkStrategy's website between 2005 and 2009. In truth, the Capital Fund's combined 
assets never exceeded $12 million at any time. 
Misrepresentations Concerning ThinkStrategy's Management Team 
49. From the firm's inception, ThinkStrategy and Kapur engaged in a pattern of 
deceptive marketing designed to bolster the purported size, credentials, and experience of 
ThinkStrategy as a hedge fund manager. These misrepresentations gave the appearance that 
ThinkStrategy was a sophisticated operation with a well-credentialed team, when in fact the firm 
was essentially a one-person operation with a few supporting employees. 
50. In the section ofThinkStrategy's marketing materials describing the firm's 
principals and management team, the names 
ofseveral individuals (aside from Kapur) appeared in 
various versions with assorted titles, as follows: 
• Person A ("Principal," 
"Vice President," or "Research Analyst") 
• Person B ("Advisory Director" 
or "Principal") 
• Person C ("Principal") 
• Person D ("Director," "Managing Director," 
or "Advisory Director") 
51. 
On several occasions, ThinkStrategy also provided purported biographies for these 
individuals 
in marketing materials and in due diligence questionnaires, among other places. 
According to their biographies, each 
ofthese individuals had industry experience and had obtained 
various degrees from the University 
ofPennsylvania ("Penn"). Kapur himselfhad received an 
undergraduate business degree from Penn's Wharton School ("Wharton"), thus giving investors 
10 


the impression that Kapur had surroooded himself with a team ofhis "best and brightest" Wharton 
classmates. 
52. None 
ofthe aforementioned individuals had ever been employed by or affiliated 
with 
ThinkStrat~gy. Person A and Person B were students with Kapur at Penn years earlier, but 
had never been employed by ThinkStrategy nor authorized Kapur to use their names in association 
with the 
finn. Person C had never heard ofThinkStrategy or Kapur. 
53. Similarly, Person D was never affiliated with ThinkStrategy. Kapur was familiar 
with Person D because 
he attended Penn at the same time as Kapur. Person D failed to obtain a 
degree, contrary to statements 
in ThinkStrategy's marketing materials that Person D had earned an 
"MS inEngineering" from Penn and an "MBA in Finance from Wharton Business School." 
54. Kapur also misrepresented his 
own credentials and experience. In marketing 
materials sent to at least one commercial hedge fund website and at least 
one large institutional 
investor, Kapur claimed he 
had earned an MBA degree from Wharton, although he had only 
earned an undergraduate degree. 
55. 
In addition, Kapur claimed in marketing materials that ThinkStrategy had begun 
operations 
in 1998, when the finn in fact was incorporated in November 2002 and did not begin 
managing investments until mid-2003. 
In those same marketing materials, Kapur claimed to 
possess "over 15 years 
ofexperience as an investor, money manager, researcher, and system 
designer," even though that statement, made 
in 2003, meant that he would have started his career 
in 1988 at the age of 14. This was untrue. 
56.. Kapur was responsible for the foregoing misrepresentations, which appeared 
in 
ThinkStrategy's marketing materials over a five-year period, from at least 2003 through 2008. 
11 


Misstatements Concerning Due Diligence 
57. Beginning as early as 2004, ThinkStrategy and Kapur began marketing Multi-
Strategy 
F'!lIld, a fund offunds that allocated Capital to other hedge funds. Under the partnership 
agreement and offering materials, ThinkStrategy and Kapur had full discretion to allocate the fund 
assets and provided no infonnation to limited partners concerning the names 
ofsub-funds in the 
portfolio. 
58. ThinkStrategy and Kapur specifically represented to investors that the firm 
conducted a high level 
ofdue diligence on portfolio managers for the hedge funds selected for 
investment. For example, 
in marketing materials provided to investors about the Multi-Strategy 
Fund's investment selection process, ThinkStrategy represented that certain qualitative checks; 
including "reference checks" and "due diligence checks," were perfonned 
on all funds that make 
the "short list" 
of20 or fewer candidates. These materials also list "reputable service providers" as 
a criterion for any "potentially interesting candidate." 
59. Kapur told at least one investor who later invested in Multi-Strategy Fund that 
ThinkStrategy performed ''thorough due diligence" and ''background checks" 
on all fund 
managers, and that all funds were required to have audited financial statements. 
60. 
In fact, ThinkStrategy consistently failed to conduct thorough due diligence, and 
did not confinn whether funds had reputable service providers and audited financial statements. 
61..· ThinkStrategy instead selected hedge funds based primarily on an analysis oftheir 
advertised perfonnance returns. 
62. As a result, the Multi-Strategy Fund made investments in severru hedge funds that 
were later revealed to 
be Ponzi schemes or other serious frauds. Had ThinkStrategy required 
audited financial statements certified 
by bona fide accounting finns, as represented to investors, the 
Multi-Strategy Fund 
may not have invested detrimentally in those funds. 
63. 
In mid-2005, Multi-Strategy Fund invested about $500,000 in Bayou Superfund, 
LLC ("Bayou"), managed 
by since-convicted hedge fund manager, Samuel Israel III. Israel was 
charged 
by the Commission in September 2005. 
12 


64. Israel defrauded investors by misrepresenting Bayou's performance returns in 
account statements and marketing materials, and 
by issuing false year-end financial statements 
with audit opinions from a sham accounting firm called "Richmond-Fairfield Associates," which 
Bayou's principals had invented. 
65. ThinkStrategy conducted no qualitative due diligence on Bayou and Samuel IsraeL 
Specifically, there were no "due diligence checks," ''reference checks," ''background checks," 
or 
other promised efforts to ensure that Bayou had "reputable service providers." Richmond­
Fairfield, a fabricated auditor, was not a reputable service provider. 
66. After the Bayou fraud was revealed 
in August 2005, ThinkStrategy made no 
internal policy changes to improve its due diligence practices. ThinkStrategy continued to 
distribute the same marketing material described above, and'did not correct earlier representations 
that all funds in the portfolio had "reputable service providers." Accordingly, ThinkStrategy's 
marketing information continued to mislead investors about the quality 
ofits due diligence. 
67. Beginning in 2005 and continuing each year through early 2008, Multi-Strategy 
Fund made numerous investments -  totaling over $32 million -
in a hedge fund called Finvest 
,Primer ("Primer Fund"), a fraudulent enterprise managed 
byGad Grieve and Finvest Asset 
Management, LLC ("Finvest") that was also the subject 
ofCommission action in February 2009. 
68. ThinkStrategy conducted virtually no qualitative due diligence checks 
on Finvest or 
Grieve before making its investments. 
(  69. As with Bayou, Finvest and Grieve perpetrated their fraud on investors in part 
by 
disseminating false year-end financial statements with an audit opinion from a fictional accounting 
firm that Grieve created called "Kass Roland LLC." 
70. 
In 2006, Finvest provided ThinkStrategy with audited 2005 Primer Fund financial 
statements that were purportedly certified 
by Kass Roland. 
71. A basic effort to look into Kass Roland would have revealed that it was not a bona 
fide accounting firm, much less a reputable one. Kass Roland, naturally, had no name recognition 
or reputation. Moreover, Kass Roland had no website, its listed address in the audit report was on 
13 


a non-existent street in Jersey City, and its listed phone was answered exclusively by machine. 
The finn was not licensed by either the Public Company Accounting Oversight Board or the New 
Jersey Board 
ofAccountancy. 
72. Another warning about Primer Fund came 
in October 2008, when the auditor for 
Multi-Strategy Fund questioned 
why Primer Fund had failed to provide audited financial 
statements for fiscal years 2006 and 2007. The auditor wanted to know what procedures 
ThinkStrategy had performed to verify the fund valuations. 
73.. Kapur dismissed the issue 
in a reply email, stating, "We have received statements 
from their independent administrator 
finn, thus are comfortable." 
74. Primer 
Fund's purported admini~trator was called "Global Hedge Fund Services," 
another sham entity created 
by Grieve. ThinkStrategy assumed the firm was legitimate and 
reputable without inquiry, even though Global Hedge Fund Services was not a bona fide 
adniinistrator and had no clients other than 
Finvest 
75. . Individually and collectively, these facts should have raised immediate red flags 
about the legitimacy 
ofFinvest and Primer Fund. ThinkStrategy, however, did not ensure that 
either KassRoland 
or Global Hedge Fund Services was a "reputable service provider" as stated in 
its marketing materials to investors. 
76. Multi-Strategy 
Fund was similarly harmed by investments in other hedge funds that 
lacked reputable service providers to serve as a check 
on their adveltised returns and assets~ For 
instance, Multi-Strategy Fund 
made a $9.5 million investment in Victory Fund ("Victory") and 
Valhalla Investment Partners ("Valhalla"), which were part 
ofa group ofhedge funds advised by 
Arthur Nadel, who the Commission charged in January 2009 with falsifying historical returns and 
overstating the funds' assets. Nadel was also criminally indicted 
in April 2009 on mUltiple counts 
ofsecurities, mail, and wire fraud. 
77. Contrary to ThinkStrategy's statements that all portfolio hedge funds had reputable 
service providers, Victory and Valhalla, its feeder fund, had never been audited. 
14 


78. Moreover, Nadel, a former New York attorney, had been disbarred and banned 
from practicing law 
in 1982 for "dishonesty, fraud, deceit, and misrepresentation." There is no 
evidence that ThinkStrategy conducted a background check on Nadel as promised to investors; 
79.· Multi-Strategy Fund also invested $5 million in Atlantis Capital Management, 
LP 
("Atlantis"), a fund managed by Roman Lyniuk. In March 2011, Lyniuk was the subject of 
Commission proceedings alleging, among other things, numerous material misrepresentations and 
omissions to investors concerning Atlantis's performance and assets. 
80. Atlantis also had no independent auditor 
or audited financial statements, and thus 
did not meet ThinkStrategy's purported due diligence standards. 
F~TCL~FORRELmF 
Violations of Section 17(a) ofthe Securities Act 
[15 U.S.C. § 77q(a») 
81. The Commission realleges and reincorporates paragraphs 1 through 82 as iffully 
set forth herein. 
82. From 2003 through at least 2009, ThinkStrategy and Kapur, 
by use ofthe means or 
instrumentalities 
ofinterstate commerce or ofthe mails, in connection with the offer or sale of 
securities: (a) employed devices, schemes, or artifices to defraud; (b) obtained money or property 
by means ofuntrue statements ofmaterial fact or omissions to state material facts necessary in 
order to make the statements made, in the light 
ofthe circumstances under which they were made, 
not misleading; and/or ( c) engaged in transactions, practices, or courses ofbusiness which operated 
or would operate as a fraud or deceit upon the' purchasers ofthe securities offered and sold by the 
Defendants. 
83. As alleged above, ThinkStrategy and Kapur knowingly 
or recklessly overstated 
performance returns for the Capital Fund, and also misrepresented material facts about the 
firm and 
the funds it managed such as 
in~eption dates, historical track record, assets, and the quality and size 
ofThinkStrategy's management team. 
• 

15 


84. As further alleged above, ThinkStrategy and Kapur told investors that all sub-funds 
in the Multi-Strategy Fund's portfolio would have reputable service providers and audited financial 
statements. ThinkStrategy failed, however, to verify auditors 
and financial statements as promised, 
causing Multi-Strategy Fund to invest 
in several Ponzi schemes or serious offering frauds. At no 
time did ThinkStrategy and Kapur correct their material misstatements and omissions 
by disclosing 
that the promised due diligence 
had not been performed. ThinkStrategy and Kapur acted 
lmowingly, recklessly, 
or negligently in engaging in the conduct alleged above. 
85. 
By reason oftheir actions alleged herein, ThinkStrategy and Kapur each violated 
Section 17(a) 
ofthe Securities Act [15 U.S.C. § 77q(a)]. 
SECOND CLAIM FOR RELIEF 

Violations of Section 10(b) ofthe Exchange Act 

and Rule 10b-5 Thereunder 

[15 U.S.c. §78j(b); 17 C.F.R. § 240.10b-5] 

86. The Commission realleges.and reincorporates paragraphs 1 through 87 as iffully 
set forth herein. 
87. From 2003 through 
at least 2009, ThinkStrategy and Kapur, by use ofthe means or 
instrumentalities ofinterstate commerce or ofthe mails, in connection with the purchase or sale of 
securities: (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 
the light 
ofthe circumstances under which they were made, not misleading; and/or (c) engaged in 
acts, practices 
or courses ofbusinesswhich operated or would operate as a fraud or deceit. 
88. Specifically, ThinkStrategy 
and Kapur lmowingly or recklessly overstated 
performance returns for the Capital Fund, and also misrepresented material facts about the firm and 
the funds it managed such as inception dates, historical track record, assetS, and the quality and size 
ofThinkStrategy' s management team. 
89. 
By reason oftheir actions alleged herein, ThinkStrategy and Kapur each violated 
Section lO(b) 
ofthe Exchange Act and Rule lOb-5 thereunder [15 U.S.c. § 78j(b); 17 C.F.R. § 
240.1 Ob-5]. 
16 


THIRD CLAIM FOR RELIEF 

Violations of Section 206(4) of the Advisers Act 

and Rule 206(4)-8 Thereunder 

[15 U.S.C. § 80b-6(4); 17 C.F.R. §275.206(4)-8] 

90. The Commission realleges and reincorporates paragraphs 1 through 91 as iffully 
set forth herein. 
91. From September 2007 through at least 2009, ThinkStrategy and Kapur: (a) made 
untrue statements 
ofmaterial fact and omitted to state material facts necessary to make the 
. statements made, 
in the light ofthe circumstances under which they were made, not misleading, to 
investors and/or prospective investors 
in pooled investment vehiCles; and (b) engaged in acts, 
practices, and/or courses 
ofbusiness that were fraudulent, deceptive, and manipulative with respect 
to investors and/or proposed investors 
in pooled investment vehicles. 
92. As alleged above, ThinkStrategy and Kapur knowingly 
or recklessly overstated 
performance returns for the Capital Fund, and also misrepresented material facts about the firm and 
the 
funds it managed such as inception dates, historical track record, assets,and the quality and size 
ofThinkStrategy's management team. 
93. As further alleged above, ThinkStrategyand Kapur told investors that all sub-funds 
in the Multi-Strategy Fund's portfolio would and did have reputable service providers and audited 
financial statements. ThinkStrategy failed, however, to verify auditors and financial statements as 
.  promised, causing Multi-Strategy Fund to invest 
in several Ponzi schemes or serious offering 
frauds. 
At no time did ThinkStrategy and Kapur correct their misstatements and omissions by 
disclosing that the promised· due diligence had not been performed. ThinkStrategy and Kapur 
acted knowingly, recklessly, or negligently in engaging in the conduct alleged above. 
94. 
By reason oftheir actions alleged herein, ThinkStrategy and Kapur each violated . 
Section 206(4) 
ofthe Investment Advisers Act and Rule 206(4)-8 thereunder [15 U.S.C. § 80b­
6(4); 17 C.F.R. §275.206(4)-8]. 
17 


PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that the Court: 
(i) Enter judgment in favor 
ofthe Commission finding that ThinkStrategy and Kapur each 
violated the securities laws and rules promulgated thereunder as alleged herein; 
(ii) Permanently enjoin ThinkStrategy and Kapur from.violating Section 17(a) ofthe 
Securities Act, Section 10(b) 
ofthe Exchange Act and Rule 10b-5 promulgated thereunder, and 
Section 206(4) 
ofthe Advisers Act and Ru1e 206(4)-8 promulgated thereunder [15 U.S.C. §§ 
77q(a), 78j(b), 80b-6(4); 17 C.F.R. §§ 240.l0b-5, 275.206(4)-8]; 
(iii) Order ThinkStrategy and Kapur, jointly and severally, to disgorge the profits and 
proceeds they obtained as a result 
oftheir actions alleged herein, and to pay prejudgment interest 
thereon; 
(iv) Order ThinkStrategy and Kapur each to 
pay civil monetary penalties pursuant to 
Section 20( d) 
ofthe Securities Act, Section 21 (d)(3) ofthe Exchange Act, and Section 209( e) of 
the Advisers Act [15 U.S.c. §§ 77t(d), 78u(d)(3), 89b-9(e)J; and 
(v) Grant such other relief as the Court 
may deem just and proper. 
Respectfully submitted, 
Date: 
November~2011 
John 
D. Worland, Jr. 
Of Counsel: 
u.S. Securities and Exchange Commission 
Robert B. Kaplan 
100 F. Street, 
N.E. 
. Scott F. Weisman 
Washington, D.C. 20549 
Darren 
E. Long 
202-551-4438 
202-772-9292 (fax) 
[email protected] 
H. Michael Semler 
U.S. Securities and Exchange Commission 
100 
F. Street, N.E. 
Washington, D.C. 20549 
202-551-4429 
18 

202-772-9292 (fax) 
[email protected] 
19 

11 
UNITED STATES DISTRICT COURT CW 80 9 4 

SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE 

COMMISSION, ... 


Plaintiff, 
v. Civil Action No. ___ 

CRETAN KAPUR; 

LILABOC, LLC, d/b/a THINKSTRATEGY : 

CAPITAL MANAGEMENT, LLC, 


Defendants. 

COMPLAINT 


Plaintiff Securities and Exchange Commission ("Commission") alleges as follows: 


SUMMARY 

1. This action involves a pattern ofdeceptive conduct by unregistered hedge fund 


adviser Lilaboc, LLC d/b/a ThinkStrategy Capital Management, LLC ("ThinkStrategy") and its 


sole managing principal, Chetan Kapur. ThinkStrateg}' andKapurmanagedand advised two 


. hedge funds: (i) ThinkStrategy Capital Fund ("Capital Fund"), an equities-trading fund that ceased 

operations in 2007; and (ii) TS Multi-Strategy Fund ("Multi-Strategy Fund"), a fund ofhedge 

funds. At its peak in 2008, ThinkStrategy managed approximately $520 million in assets. 

2. Over nearly seven years, T.I;1inkStrategy and Kapur misrepresented to their investors 

various information concerning the funds' investmentperformance, longevity, assets, and the 

credentials and experience ofThinkStrategy's management team. 

3. In addition, with respect to the Multi-Strategy Fund, ThinkStrategy and Kapur 

misstated the scope and quality of their due diligence checks on certain managers and funds 

selected for inclusion in the hedge fund's portfolio. Although ThinkStrategy and Kapur told 

investors that all funds in the portfolio would be selected using a rigorous due diligence process, 

including having reputable service providers, they instead selected several funds that failed to meet 



this standard. As a result, the Multi-Strategy Fund made investments in several hedge funds that 

were later revealed to be Ponzi schemes or other serious frauds, including Bayou Superfund, 

Valhalla!Victory Funds, and Finvest Primer Fund. Had ThinkStrategy adhered to its stated due 

diligence standards, and required audited financial statements certified by bona fide accounting 

firms, the MUlti-Strategy Fund may not have invested detrimentally in those funds. 

4. By their conduct alleged herein, Defendants engaged in and, unless restrained and 

enjoined by the Court, may continue to engage in, transactions, acts, practices, and courses of 

business that violate Section 17(a) of the Securities Ac~ of 1933 (the "Securities Act") [15 U.S.C. § 

77q(a)]; Section 1O(b) of the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. § 

78j(b)] and Rule 10b-5 thereunder [17 c.F.R. § 240.lOb-5]; and Section 206(4) of the Investment 

Advisers Act of 1940 (the "Advisers Act") [15 U.S.C. § 80b-6(4)] and Rille 206(4)-8 thereunder 

[17 C.F.R. § 275.206(4)-8]. 

5. The Commission seeks a judgment from the Court: (a) enjoining the Defendants 

from engaging in the transactions, acts, practices, and courses ofbusiness alleged in this Complaint 

and transactions, acts, practices, and courses ofbusiness of similar purport and object; (b) requiring 

Defendants to disgorge, with prejudgment interest, the illegal profits and proceeds they obtained as 

a result of their actions alleged herein; and ( c) requiring Defendants to pay civil monetary penalties 

pursuant to Section 20(d) of the Securities Act, Section 21 (d)(3) of the Exchange Act, and Section 

209(e) ofthe Advisers Act [15 U.S.C. §§ 77t(d), 78u(d)(3), and 80b-9(e)]. 

JURISDICTION' 

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

22(a) ofthe Securities Act, Sections 21(d), 21 (e) and 27 of the Exchange Act, and Section 214 of 

the Advisers Act [15 U.S.C. §§ 77t(b), 77t(d), 77v(a), 78u(d), 78u(e), 78aa, and 80b-14]. 

7. The Defendants made use of the means and instrumentalities of interstate 

commerce or of the mails in connection with the acts, practices, and courses ofbusiness alleged 

herein, certain ofwhich occurred within the Southern District of New York. Venue is proper in 

2 




this District pursuant to Section 22( a) of the Securities Act, Section 27 of the Exchange Act, and 

Section 214 of the Advisers Act [15 U.S.c. §§ 77v(a), 78aa, and 80b-14]. 


THE PARTIES 


8. The Plaintiff is the Securities and Exchange Commission, which brings this civil 

. action pursuant to authority conferred on it by Section 20(b) ofthe Securities Act, Section 21(d)(I) 

.of the Exchange Act, and Section 209 of the Advisers Act [15 U.S.C. §§ 77t(b), 78u(d)(1),and 

80b-9] . 

. 9. Defendant Chetan Kapur, age 36,is a citizen ofIndia and a resident ofNe.w York. 

He is the founder and sole managing director ofThinkStrategy. 

10. Defendant Lilaboc, LLC d/b/a ThinkStrategy Capital Management, LLC is a 

Delaware limited liability company formed in November 2002, with its principal place ofbusiness 

in New York, New York. ThinkStrategy served as general partner and investment adviser to TS 

Multi-Strategy Fund and ThinkStrategy Capital Fund. ThinkStrategy has never been registered 

with the Commission. 

RELATED ENTITIES 

11. ThinkStrategy Capital Fund, L.P. and ThinkStrategy Capital Fund, Ltd. 

(collectively, the "Capital Fund") were sister hedge funds organized in an onshore/offshore 

structure in the U.S. and British Virgin Islands, and managed by ThinkStrategyfr?m 2003 through 

late.2007 when it ceased operations. Capital Fund employed an equities trading investment 

. strategy and utilized two share classes, an A class that Kapur traded himself through a series of 

brokerage firms ("Capital Fund-A") and a B class in which Kapur allocated capital to three 

different sub-managers ("Capital Fund-B"). Capital Fund was relatively small, with 16 distinct 

investors and $12 million or less in assets over its four year history. 

12. TS Multi-Strategy Fund, L.P. and TS Multi-Strategy Fund, Ltd. (collectively, the 

"Multi-Strategy Fund") are sister hedge funds organized in an onshore/offshore structure in the 

U.S. and British Virgin Islands, and managed by ThinkStrategy from 2004 until November 2010, 

3 




when the funds entered into voluntary liquidation and were placed under the control ofcourt­

. appointed receivers. Multi-Strategy Fund employed a fund-of-funds strategy in which it invested 

. . solely in other hedge funds and utilized two share classes, a leveraged A class ("Multi-Strategy 

Fund-A") and an unleveraged B class ("Multi-Strategy Fund-B"). At its peak in 2008, Multi­

Strategy Fund had approximately $520 million in assets and 90 distinct investors. 

FACTUAL ALLEGATIONS 


Background 


13. Kapur fonned ThinkStrategy in 2002 to serve as investment adviser to a hedge fund. 

he planned to launch. Kapur managed ThinkStrategy himself and was at all times the fum's sole 

managing director and controlling principaL 

14. In July 20q3, he fonned Capital Fund, a long-short, market-neutral hedge fund that 

. began trading in mid-2003. 

15. In mid-2004, Kapur founded a fund ofhedge funds, the Multi-Strategy Fund, which 

began making investments in other hedge funds in September 2004 .. 

16. In 2006, Kapur started Capital Fund.::B, a second share class for Capital Fund, 


which allocated capital to three independent sub-advisers who were . authorized to trade the 


account. Capital Fund-B began trading in October 2006. 


17. Similarly in 2007, Kapur created Multi-Strategy Fund-B, an unleveraged share. 

class ofMulti-Strategy Fund that made its first sub-fund investment in January 2008 . 


. Misrepresentations Concerning Performance and Assets 


18. From at least 2003 through mid-2009, ThinkStrategy and Kapur disseminated false 

and materially misleading infonnation to investors concerning the perfonnance, longevity, and 

assets ofCapital Fund and Multi-Strategy Fund. 

19. Beginning as early as 2004, ThinkStrategy and Kapur materially overstated Capital 

Fund-A's perfonnance, giving investors the false impression that the fund's track record was 

consistently positive and minimally volatile compared to hedge funds using a similar strategy. 

4 




20. Even though Capital Fund-A had liquidated by late-2006 and ceased all trading by 

early 2008, ThinkStrategy coritinued reporting overstated results for Capital Fund-A through the 

first quarter of2009. 

21. ThinkSttategy and Kapur reported these results to current and prospective investors 

through mailings, e-mail, and po stings on commercial hedge fund web sites such as Barclay Hedge, 

Hedgeco, and Morningstar. 

22. ThinkStrategy publicly reported that Capital Fund-A had achieved positive annual 

returns in each year from 2003 through 2008, and double-digit annual returns in four of those six 

years. 

23. ill fact; Capital Fund-A had only one year ofpositive perfonnance from 2003 

. through 2008 and had sustained significant losses in several years. 

24. A comparison ofth~ annual perfonnance returns reported by ThinkStrategy and the 

actual returns are as follows: 

Table 1: Capital Fund-A, Reported v. Actual Returns (Annual) 

Yi!af- ThinkStrategy Rel!orted Actual­

2003 6.9% -4.2% 
2004 14.9% -15.7% 
2005. 14.7% 13.0% 
2006 19.6% -25.2% 
2007 22.6% -77.9% 

·2008 4.6% -89.9% 

25. ThinkStrategy's month-to-month reporting ofCapital Fund-A's performance results 

was also false and materially misleading. As illustrated by the graph below, Capital Fund-A's 

reported monthly returns from 2004 to 2008 portray the fund as having achieved consistently 

positive and smooth returns :with only a few negative months. ill reality, the fund had numerous 

negative months, fell sharply in or about June 2006, and never rebounded. 

5 




Figure 1: Capital Fund-A, Reported v. Actual Returns (Monthly) 

6% 

3% 

0% 

-3% 

-6% 

-9% 

-12% 

-15% 

-18% 

-21% 

-24% 

-27% 

-30% ..... '- V> Z '- '- V> Z '- '- V> Z '- V> Z Ql 
'-

Ql 
::J Ql Ql 0 ::J Ql Ql 0 ::J Ql Ql 0 ::J Ql OJ 0 ::J Ql 
Ql S S C II) Ql S S C II) S S C II) OJ S S C II) S 

T "0 T "0 T "0 "0I ..... -< a I < I ..... I < I ..... < ..... -< I < I ..... a I a -<
I 

a a -<
I 

a 6 I 6 a II I I I I 
~ a In a a 0'1 6 a ....... a a 
~ a a ~ 

a In 6 a In 0'1 6 a 0'1 ....... a 6 ....... ....... 00 a 

~ ~ ~ In In In 0'1 0'1 0'1 ....... ....... 00 


-TS Reported 

26. From 2003 to 2006, Capital Fund-A had less than ten investQfs at any given time 

and a relatively small asset value, ranging from a few thousand dollars to as high as $10 million. 

By early 2006, the fund had ceased accepting new investors and the few remaining outside 

investors in Capital Fund-A were mostly or fully redeemed. 

27. For the nextthree years, however (even beyond the period shown in Figure 1), 

ThinkStrategy and Kapur continued reporting mostly positive returns to investors in other 

'ThinkStrategy funds, to prospective investors, and to th~ investing public at large. 

28. In this way, Kapur was able to market his "successful" record in Capital Fund-A 

and draw investors into Capital Fund-B and the Multi-Strategy Fund. 

29. Kapur had sole and ultimate authority for all ofCapital Fund-A's performance 

misrepresentations. The performance returns for Capital Fund-A were calculated and generated by 

Kapur himself, without the assistance ofanyone else. Although three different employees handled 

6 




investor communications over the years, Kapur always generated the performance information and 

gave final approval for all postings on commercial hedge fund websites and performance-related 


communications to investors. 


30. ThinkStrategy did not use a third party to independently generate or verify Capital 

Fund-A perforniance data. D~g its six years ofreporting activity, Capital Fund-A never used an 

outside administrator, custodian, or auditor, with one exception. 

31. At the end of2003, Capital Fund-A's first year ofoperation, ThinkStrategy 

generated financial statements that were audited by an accounting firm. Although these financial 

statements showed that Capital Fund had generated a negative performance return (-4.24%) for 

2003, ThinkStrategy did not provide them to investors. Rather, ThinkStrategy and Kapur reported. 

a positive year-end performance return of6.9% for 2003 in marketing materials, investor 

communications, and on commercial hedge fund websites. The discrepancy between the reported 

and audited results was so significant that TIrinkStrategy's director ofinvestor relations resigned 

upon discovering it. 

32. ThinkStrategy started the Capital Fund-B share class in 2006, based in part on the 

purportedly successful track record ofCapital Fund-A. Capital Fund-B employed an equities 

trading strategy using three independent sub-advisers to trade 'on the fund's behalf. 

33. IIi July 2007, one of the sub-advisors suffered significant trading losses, resulting 

that month in a -25% return in the overall fund. Kapur reported the loss accurately to investors in a 

July 2007 newsletter, but assured them that the fund would recover by year's end. ThinkStrategy 

and Kapur then reported' steady positive performance for the remainder of2007 and a 19.9% return 

in December 2007, purportedly giving the fund a positive, albeit modest, gain for the year. 

ThinkStrategy thereafter quickly wound down Capital Fund-B and redeemed all investors. 

34. In fact, Capital Fund-B did not recover from the July 2007 loss through a long-term 

hedge or other skillful trading. Rather, the fund continued losing money from trading throughout 

2007, resulting in an annual 2007 return of -31.9%, as set forth below. 

7 




Table 2: Capital Fund-B, Reported v. Actual Returns (Monthly) 

Month ThinkStrate~ ReRorted Actual 

Jul. 2007 -25.7% -25.6% 
I 

Aug. 2007 0.0% -2.4% 
Sep.2007 10.1% 13.1% 
Oct. 2007 1.5% -1.9% 
Nov. 2007 1.0% -18.3% 
Dec. 2007 19.9% 3.1% 
YearEnd 0.9% -31.9% 

35. ThinkStrategy was able to redeem Capital Fund-B investors, despite the 

undisclosed losses, because the sub-adviser responsible for the July 2007 loss later agreed to 

reimburse the fund approximately $1 million. This reimbursement occurred in February 2008, 

many months after Capital Fund-B's purported recovery and rebound in the latter half of2007~ 

36. ThinkStrategy's reporting ofCapital Fund-B's performance returns during the last 

five months of2007 was materially inaccurate and gave investors the false .impression that Kapur 

had salvaged the fund through his own trading expertise. 

Longevity and Past Performance of Capital Fund and Multi-Strategy Fund 

37. In a further effort to attract investments, ThinkStrategy and Kapur repeatedly 

deceived investors about the longevity and performance history of their managed funds. 

38. For example, in marketing materials sent to current and prospective investors, and 

on commercial hedge fund websites, ThinkStrategy claimed that Capital Fund-A began trading in 

January 1998. 

39. ThinkStrategy supported this misrepresentation with a history ofpurported monthly 

-returns dating from January 1998 through July 2003. 

40. In fact, Capital Fund-A did not begin trading until July 2003. 

41. . The impact of Capital Fund-A's false inception date and track record was highly 

material, because it gave the appearance that ThinkStrategy and Kapur possessed an additional five 

years of fund manag~ent experience and successful performance history. 

8 




42. ThinkStrategy and Kapur made similar misrepresentations about the inception and • 
track record of the other ThinkStrategy funds. Capital Fund-B only began trading in October 2006, 

yet ThinkStrategy reported actual returns for the fund dating back to January 2006, erroneously 

crediting the fund with an extra nine months ofexperience and positive perfonnance. 

43. In addition, Multi-Strategy Fund-A and Multi-Strategy Fund-B began making 

investments in September 2004 and January 2008, respectively, yet ThinkStrategy reported 

unsupported monthlyperfonnance returns dating back to'January 2003 and January 2007, 

respectively. 
•

44. In each case, there was no legitimate or actual fund investment activity to 

corroborate the reported results, nor was there a disclaimer in ThinkStrategy's marketing materials 

that returns were based on pro fonna, simulated, or model investing. In this way, ThinkStrategy 

and Kapur exaggerated tlIeir experience, creating a more attractive track record for potential 
, , 

investors. Kapur was responsible for generating the historical performance numbers and had 


ultimate authority over all performance-related communications. 


Fund Assets and Firm Assets Under Management .' 
" 


45. Throughout the relevant period, ThinkStrategy and Kapur repeatedly inflated 

ThinkStrategy's assets under management ("AUM")in communications to investors and 

prospective investors. 

46. For example, in February 2.009 Kapur represented to an investor that the firm's 

AUM was $600 million, purportedly comprised of$200 million in the Multi-Strategy Fund (which 

was roughly a~urate) and an additional $400 million in other managed funds (which was false). 

At that time, ThinkStrategy's only managed fund was the Multi-Strategy Fund, which had 

approximately $2.00 million in assets. The Capital Fund account balances had been close to zero • • 

for several years. ThinkStrategy and Kapur managed no other funds or accounts. 

9 




47. Similarly, in June 2008, at Kapur's direction, 1binkStrategy responded to an 

investor that the finn had $100 million in two separate managed accounts. In fact, 1binkStrategy 

and Kapur had no managed accounts aside from the Multi-Strategy Fund at that time. 

48. In addition, in a news article published by Institutional Investor, dated April 15, 

2004,at a time when Kapur was attempting to raise new money for the Multi-Strategy Fund, 

Kapur claimed that his other fund, Capital Fund, had $95 million in assets. Kapur republished the 

article on ThinkStrategy's website between 2005 and 2009. In truth, the Capital Fund's combined 

assets never exceeded $12 million at any time. 

Misrepresentations Concerning ThinkStrategy's Management Team 

49. From the firm's inception, ThinkStrategy and Kapur engaged in a pattern of 

deceptive marketing designed to bolster the purported size, credentials, and experience of 

ThinkStrategy as a hedge fund manager. These misrepresentations gave the appearance that 

ThinkStrategy was a sophisticated operation with a well-credentialed team, when in fact the firm 

was essentially a one-person operation with a few supporting employees. 

50. In the section ofThinkStrategy's marketing materials describing the firm's 

principals and management team, the names ofseveral individuals (aside from Kapur) appeared in 

various versions with assorted titles, as follows: 

• Person A ("Principal," "Vice President," or "Research Analyst") 
• Person B ("Advisory Director" or "Principal") 
• Person C ("Principal") 
• Person D ("Director," "Managing Director," or "Advisory Director") 

51. On several occasions, ThinkStrategy also provided purported biographies for these 

individuals in marketing materials and in due diligence questionnaires, among other places. 

According to their biographies, each of these individuals had industry experience and had obtained 

various degrees from the University ofPennsylvania ("Penn"). Kapur himselfhad received an 

undergraduate business degree from Penn's Wharton School ("Wharton"), thus giving investors 

10 




the impression that Kapur had surroooded himself with a team of his "best and brightest" Wharton 

classmates. 

52. None ofthe aforementioned individuals had ever been employed by or affiliated 

with ThinkStrat~gy. Person A and Person B were students with Kapur at Penn years earlier, but 

had never been employed by ThinkStrategy nor authorized Kapur to use their names in association 

with the finn. Person C had never heard ofThinkStrategy or Kapur. 

53. Similarly, Person D was never affiliated with ThinkStrategy. Kapur was familiar 

with Person D because he attended Penn at the same time as Kapur. Person D failed to obtain a 

degree, contrary to statements in ThinkStrategy's marketing materials that Person D had earned an 

"MS in Engineering" from Penn and an "MBA in Finance from Wharton Business School." 

54. Kapur also misrepresented his own credentials and experience. In marketing 

materials sent to at least one commercial hedge fund website and at least one large institutional 

investor, Kapur claimed he had earned an MBA degree from Wharton, although he had only 

earned an undergraduate degree. 

55. In addition, Kapur claimed in marketing materials that ThinkStrategy had begun 

operations in 1998, when the finn in fact was incorporated in November 2002 and did not begin 

managing investments until mid-2003. In those same marketing materials, Kapur claimed to 

possess "over 15 years ofexperience as an investor, money manager, researcher, and system 

designer," even though that statement, made in 2003, meant that he would have started his career 

in 1988 at the age of 14. This was untrue. 

56.. Kapur was responsible for the foregoing misrepresentations, which appeared in 

ThinkStrategy's marketing materials over a five-year period, from at least 2003 through 2008. 

11 




Misstatements Concerning Due Diligence 

57. Beginning as early as 2004, ThinkStrategy and Kapur began marketing Multi-

Strategy F'!lIld, a fund of funds that allocated Capital to other hedge funds. Under the partnership 

agreement and offering materials, ThinkStrategy and Kapur had full discretion to allocate the fund 

assets and provided no infonnation to limited partners concerning the names ofsub-funds in the 

portfolio. 

58. ThinkStrategy and Kapur specifically represented to investors that the firm 

conducted a high level ofdue diligence on portfolio managers for the hedge funds selected for 

investment. For example, in marketing materials provided to investors about the Multi-Strategy 

Fund's investment selection process, ThinkStrategy represented that certain qualitative checks; 

including "reference checks" and "due diligence checks," were perfonned on all funds that make 

the "short list" of20 or fewer candidates. These materials also list "reputable service providers" as 

a criterion for any "potentially interesting candidate." 

59. Kapur told at least one investor who later invested in Multi-Strategy Fund that 

ThinkStrategy performed ''thorough due diligence" and ''background checks" on all fund 

managers, and that all funds were required to have audited financial statements. 

60. In fact, ThinkStrategy consistently failed to conduct thorough due diligence, and 

did not confinn whether funds had reputable service providers and audited financial statements. 

61..· ThinkStrategy instead selected hedge funds based primarily on an analysis of their 

advertised perfonnance returns. 

62. As a result, the Multi-Strategy Fund made investments in severru hedge funds that 

were later revealed to be Ponzi schemes or other serious frauds. Had ThinkStrategy required 

audited financial statements certified by bona fide accounting finns, as represented to investors, the 

Multi-Strategy Fund may not have invested detrimentally in those funds. 

63. In mid-2005, Multi-Strategy Fund invested about $500,000 in Bayou Superfund, 

LLC ("Bayou"), managed by since-convicted hedge fund manager, Samuel Israel III. Israel was 

charged by the Commission in September 2005. 

12 




64. Israel defrauded investors by misrepresenting Bayou's performance returns in 

account statements and marketing materials, and by issuing false year-end financial statements 

with audit opinions from a sham accounting firm called "Richmond-Fairfield Associates," which 

Bayou's principals had invented. 

65. ThinkStrategy conducted no qualitative due diligence on Bayou and Samuel IsraeL 

Specifically, there were no "due diligence checks," ''reference checks," ''background checks," or 

other promised efforts to ensure that Bayou had "reputable service providers." Richmond­

Fairfield, a fabricated auditor, was not a reputable service provider. 

66. After the Bayou fraud was revealed in August 2005, ThinkStrategy made no 

internal policy changes to improve its due diligence practices. ThinkStrategy continued to 

distribute the same marketing material described above, and'did not correct earlier representations 

that all funds in the portfolio had "reputable service providers." Accordingly, ThinkStrategy's 

marketing information continued to mislead investors about the quality of its due diligence. 

67. Beginning in 2005 and continuing each year through early 2008, Multi-Strategy 

Fund made numerous investments - totaling over $32 million - in a hedge fund called Finvest 

,Primer ("Primer Fund"), a fraudulent enterprise managed byGad Grieve and Finvest Asset 

Management, LLC ("Finvest") that was also the subject ofCommission action in February 2009. 

68. ThinkStrategy conducted virtually no qualitative due diligence checks on Finvest or 

Grieve before making its investments. 

( 69. As with Bayou, Finvest and Grieve perpetrated their fraud on investors in part by 

disseminating false year-end financial statements with an audit opinion from a fictional accounting 

firm that Grieve created called "Kass Roland LLC." 

70. In 2006, Finvest provided ThinkStrategy with audited 2005 Primer Fund financial 

statements that were purportedly certified by Kass Roland. 

71. A basic effort to look into Kass Roland would have revealed that it was not a bona 

fide accounting firm, much less a reputable one. Kass Roland, naturally, had no name recognition 

or reputation. Moreover, Kass Roland had no website, its listed address in the audit report was on 

13 




a non-existent street in Jersey City, and its listed phone was answered exclusively by machine. 

The finn was not licensed by either the Public Company Accounting Oversight Board or the New 

Jersey Board ofAccountancy. 

72. Another warning about Primer Fund came in October 2008, when the auditor for 

Multi-Strategy Fund questioned why Primer Fund had failed to provide audited financial 

statements for fiscal years 2006 and 2007. The auditor wanted to know what procedures 

ThinkStrategy had performed to verify the fund valuations. 

73.. Kapur dismissed the issue in a reply email, stating, "We have received statements 

from their independent administrator finn, thus are comfortable." 

74. Primer Fund's purported admini~trator was called "Global Hedge Fund Services," 

another sham entity created by Grieve. ThinkStrategy assumed the firm was legitimate and 

reputable without inquiry, even though Global Hedge Fund Services was not a bona fide 

adniinistrator and had no clients other than Finvest 

75. . Individually and collectively, these facts should have raised immediate red flags 

about the legitimacy ofFinvest and Primer Fund. ThinkStrategy, however, did not ensure that 

either KassRoland or Global Hedge Fund Services was a "reputable service provider" as stated in 

its marketing materials to investors. 

76. Multi-Strategy Fund was similarly harmed by investments in other hedge funds that 

lacked reputable service providers to serve as a check on their adveltised returns and assets~ For 

instance, Multi-Strategy Fund made a $9.5 million investment in Victory Fund ("Victory") and 

Valhalla Investment Partners ("Valhalla"), which were part ofa group ofhedge funds advised by 

Arthur Nadel, who the Commission charged in January 2009 with falsifying historical returns and 

overstating the funds' assets. Nadel was also criminally indicted in April 2009 on mUltiple counts 

ofsecurities, mail, and wire fraud. 

77. Contrary to ThinkStrategy's statements that all portfolio hedge funds had reputable 

service providers, Victory and Valhalla, its feeder fund, had never been audited. 

14 




78. Moreover, Nadel, a former New York attorney, had been disbarred and banned 

from practicing law in 1982 for "dishonesty, fraud, deceit, and misrepresentation." There is no 

evidence that ThinkStrategy conducted a background check on Nadel as promised to investors; 

79.· Multi-Strategy Fund also invested $5 million in Atlantis Capital Management, LP 

("Atlantis"), a fund managed by Roman Lyniuk. In March 2011, Lyniuk was the subject of 

Commission proceedings alleging, among other things, numerous material misrepresentations and 

omissions to investors concerning Atlantis's performance and assets. 

80. Atlantis also had no independent auditor or audited financial statements, and thus 

did not meet ThinkStrategy's purported due diligence standards. 

F~TCL~FORRELmF 

Violations of Section 17(a) ofthe Securities Act 
[15 U.S.C. § 77q(a») 

81. The Commission realleges and reincorporates paragraphs 1 through 82 as iffully 

set forth herein. 

82. From 2003 through at least 2009, ThinkStrategy and Kapur, by use of the means or 

instrumentalities of interstate commerce or ofthe mails, in connection with the offer or sale of 

securities: (a) employed devices, schemes, or artifices to defraud; (b) obtained money or property 

by means ofuntrue statements ofmaterial fact or omissions to state material facts necessary in 

order to make the statements made, in the light ofthe circumstances under which they were made, 

not misleading; and/or ( c) engaged in transactions, practices, or courses ofbusiness which operated 

or would operate as a fraud or deceit upon the' purchasers of the securities offered and sold by the 

Defendants. 

83. As alleged above, ThinkStrategy and Kapur knowingly or recklessly overstated 

performance returns for the Capital Fund, and also misrepresented material facts about the firm and 

the funds it managed such as in~eption dates, historical track record, assets, and the quality and size 

ofThinkStrategy's management team. 

• 


15 




84. As further alleged above, ThinkStrategy and Kapur told investors that all sub-funds 

in the Multi-Strategy Fund's portfolio would have reputable service providers and audited financial 

statements. ThinkStrategy failed, however, to verify auditors and financial statements as promised, 

causing Multi-Strategy Fund to invest in several Ponzi schemes or serious offering frauds. At no 

time did ThinkStrategy and Kapur correct their material misstatements and omissions by disclosing 

that the promised due diligence had not been performed. ThinkStrategy and Kapur acted 

lmowingly, recklessly, or negligently in engaging in the conduct alleged above. 

85. By reason oftheir actions alleged herein, ThinkStrategy and Kapur each violated 

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

SECOND CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act 


and Rule 10b-5 Thereunder 

[15 U.S.c. §78j(b); 17 C.F.R. § 240.10b-5] 


86. The Commission realleges.and reincorporates paragraphs 1 through 87 as if fully 

set forth herein. 

87. From 2003 through at least 2009, ThinkStrategy and Kapur, by use of the means or 

instrumentalities ofinterstate commerce or of the mails, in connection with the purchase or sale of 

securities: (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 

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

acts, practices or courses ofbusinesswhich operated or would operate as a fraud or deceit. 

88. Specifically, ThinkStrategy and Kapur lmowingly or recklessly overstated 

performance returns for the Capital Fund, and also misrepresented material facts about the firm and 

the funds it managed such as inception dates, historical track record, assetS, and the quality and size 

ofThinkStrategy' s management team. 

89. By reason of their actions alleged herein, ThinkStrategy and Kapur each violated 

Section lO(b) of the Exchange Act and Rule lOb-5 thereunder [15 U.S.c. § 78j(b); 17 C.F.R. § 

240.1 Ob-5]. 

16 




THIRD CLAIM FOR RELIEF 

Violations of Section 206(4) of the Advisers Act 


and Rule 206(4)-8 Thereunder 

[15 U.S.C. § 80b-6(4); 17 C.F.R. §275.206(4)-8] 


90. The Commission realleges and reincorporates paragraphs 1 through 91 as iffully 

set forth herein. 

91. From September 2007 through at least 2009, ThinkStrategy and Kapur: (a) made 

untrue statements ofmaterial fact and omitted to state material facts necessary to make the 

. statements made, in the light of the circumstances under which they were made, not misleading, to 

investors and/or prospective investors in pooled investment vehiCles; and (b) engaged in acts, 

practices, and/or courses ofbusiness that were fraudulent, deceptive, and manipulative with respect 

to investors and/or proposed investors in pooled investment vehicles. 

92. As alleged above, ThinkStrategy and Kapur knowingly or recklessly overstated 

performance returns for the Capital Fund, and also misrepresented material facts about the firm and 

the funds it managed such as inception dates, historical track record, assets,and the quality and size 

ofThinkStrategy's management team. 

93. As further alleged above, ThinkStrategyand Kapur told investors that all sub-funds 

in the Multi-Strategy Fund's portfolio would and did have reputable service providers and audited 

financial statements. ThinkStrategy failed, however, to verify auditors and financial statements as 

. promised, causing Multi-Strategy Fund to invest in several Ponzi schemes or serious offering 

frauds. At no time did ThinkStrategy and Kapur correct their misstatements and omissions by 

disclosing that the promised· due diligence had not been performed. ThinkStrategy and Kapur 

acted knowingly, recklessly, or negligently in engaging in the conduct alleged above. 

94. By reason of their actions alleged herein, ThinkStrategy and Kapur each violated . 

Section 206(4) ofthe Investment Advisers Act and Rule 206(4)-8 thereunder [15 U.S.C. § 80b­

6(4); 17 C.F.R. §275.206(4)-8]. 

17 




PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court: 

(i) Enter judgment in favor of the Commission finding that ThinkStrategy and Kapur each 

violated the securities laws and rules promulgated thereunder as alleged herein; 

(ii) Permanently enjoin ThinkStrategy and Kapur from.violating Section 17(a) of the 

Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and 

Section 206(4) of the Advisers Act and Ru1e 206(4)-8 promulgated thereunder [15 U.S.C. §§ 

77q(a), 78j(b), 80b-6(4); 17 C.F.R. §§ 240.l0b-5, 275.206(4)-8]; 

(iii) Order ThinkStrategy and Kapur, jointly and severally, to disgorge the profits and 

proceeds they obtained as a result of their actions alleged herein, and to pay prejudgment interest 

thereon; 

(iv) Order ThinkStrategy and Kapur each to pay civil monetary penalties pursuant to 

Section 20( d) of the Securities Act, Section 21 (d)(3) of the Exchange Act, and Section 209( e) of 

the Advisers Act [15 U.S.c. §§ 77t(d), 78u(d)(3), 89b-9(e)J; and 

(v) Grant such other relief as the Court may deem just and proper. 

Respectfully submitted, 

Date: November~ 2011 
John D. Worland, Jr. 

Of Counsel: u.S. Securities and Exchange Commission 
Robert B. Kaplan 100 F. Street, N.E. 
. Scott F. Weisman Washington, D.C. 20549 
Darren E. Long 202-551-4438 

202-772-9292 (fax) 
[email protected] 

H. Michael Semler 
U.S. Securities and Exchange Commission 
100 F. Street, N.E. 
Washington, D.C. 20549 
202-551-4429 

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202-772-9292 (fax) 
[email protected] 

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