BlueCrest Capital Management agreed to pay $170 million to settle Securities and Exchange Commission charges that the London-based firm misled investors about the management of BlueCrest Capital International, the firm's flagship hedge fund.
In a news release Tuesday, the SEC said BlueCrest transferred many traders from the hedge fund to an internal fund, BSMA, which managed the personal capital of the firm's employees, without notifying investors.
The SEC said the firm substituted an "underperforming algorithm" for management of BlueCrest Capital International and that, for more than four years, the firm made "inadequate and misleading disclosures concerning BSMA's existence, the movement of traders from BCI to BMSA, the use of the algorithm in BCI, and associated conflicts of interest."
"An adviser's disclosures to investors and prospective investors in funds they manage must be accurate. BlueCrest investors were marketed a fund with exceptional trading talent but instead got a fund with an undisclosed algorithm that performed worse than those touted traders," said Adam Aderton, co-chief of the SEC's asset management unit, in the release.
The SEC will distribute the settlement to investors in BCI.
BlueCrest settled the SEC's order without admitting or denying the agency's claims.
In an email statement, BlueCrest said: "We are pleased to have resolved this matter which primarily involved disclosures that were made more than five years ago. During the 15 years we operated as a client-facing hedge fund manager, we generated returns of more than $22 billion for our investors."
In 2015, BlueCrest announced that it was returning capital to external investors and transitioned to a family office.
In the statement, BlueCrest noted that since the firm no longer manages external assets, "today's order does not relate in any way to our current business operations."