News Release
B.C. man admits to committing fraud and misrepresentation
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Date:
2005-05-06 -
Number:
2005/28
Vancouver – The British Columbia Securities Commission has banned a B.C. man from the securities market for 25 years and required him to pay $150,000 after he admitted to committing fraud and illegally distributing securities to investors.
Michael Ernst Ruge cannot trade securities, act as an officer or director of any issuer, nor engage in investor relations activities for 25 years, except in limited circumstances. Ruge was the sole shareholder, director and officer of Chivas Hedge Fund Ltd. Under the settlement, the BCSC has also ordered that the company cease trading in securities for 25 years.
Ruge used the business name Chivas Growth Fund Limited Partnership to issue an offering memorandum on Oct. 1, 2001. Between Dec. 18, 2001 to Feb. 6, 2003, more than $1.5-million was raised from 50 B.C., Alberta, and Ontario investors who purchased Chivas LP units under the offering memorandum. Ruge and Chivas violated securities laws in distributing the Chivas LP units without a prospectus and without being registered to trade securities.
In the settlement, Ruge admitted to perpetrating fraud against the investors when he placed more than $780,000 of the money with himself, or companies and individuals affiliated with him. Almost none of the money raised by Ruge was used as contemplated by the offering memorandum. About $240,000 was refunded to investors, but there is little prospect of additional recovery and the investors have lost most of their money.
The misrepresentations made in the offering memorandum included:
- Stating Chivas LP was a hedge fund when only a small portion of the investors’ money was placed in actively traded stocks
- Overstating Ruge’s business experience and qualifications
- Falsely stating Chivas LP was a limited partnership in B.C.
Ruge also admitted that he personally made some misrepresentations to investors: He stated that Chivas LP was a hedge fund; claimed that he had “cream of the crop people” in a New York office when, in fact, there were no New York employees; stated Chivas had sold all of its units, reaching its $20-million cap, when it had only sold about $1.5-million units; and, falsely claimed Chivas LP had a rate of return between 26- to 45-per cent.
Similar misrepresentations were also made on a website maintained by Ruge.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the settlement on our website www.bcsc.bc.ca by typing in the search box, Michael Ernst Ruge or 2005 BCSECCOM 297. If you have questions, contact Andrew Poon, Media Relations, 604-899-6880.