Indian American manager fined for defrauding investors

WASHINGTON - An Indian American manager of a hedge-fund that catered to Silicon Valley professionals has been fined by the Securities and Exchange Commission and barred from the investment advising business for five years.

Neil Godbole, 29, of San Francisco, agreed to a $40,000 civil penalty for concealing large trading losses in his Opulent Lite hedge fund, the SEC said Wednesday.

In a cease-and-desist order, the SEC accused Godbole of fraudulent and misleading conduct and deliberately providing false information to investors. He agreed to the order without admitting or denying the findings.

Opulent Lite, based in Saratoga, collapsed in early 2009 when Godbole disclosed large trading losses he incurred a year earlier. The losses increased as he tried to make them up without telling his investors, the SEC said.

Godbole’s father, Vishwas Godbole, is a retired Silicon Valley tech executive who operates the original Opulent hedge fund from his home in Saratoga. The SEC action is directed solely at Neil Godbole’s management of Opulent Lite.

The younger Godbole began managing Opulent Lite in 2005 not long after graduating from University of California Los Angeles. The fund at its peak had 70 investors and $30 million in assets.

Until 2008, Neil Godbole followed a conservative investment strategy, investing Opulent Lite’s assets in short-term Treasury bonds and S&P Index options and cashing out the fund’s positions at the end of each month.

But in February 2008, he lost about $8.3 million in “a series of highly unprofitable trades,” the SEC said. “He failed, however, to disclose the loss and misrepresented the value of the fund, telling investors it was valued at $28.7 million, rather than its actual value, $18.5 million.”

Throughout 2008, the SEC said, Godbole “unsuccessfully tried to make up the loss” while misleading investors. In September, for example, Godbole reported trading losses of $859,000 when the fund had lost $4 million. He reported the fund’s asset value as $29 million when it had actually fallen to $19 million, the SEC said.

A lawsuit filed by investors is currently in arbitration.

His lawyer, Jahan Raissi, issued a brief statement: “From the beginning, Neil Godbole cooperated fully and openly with the SEC and he’s happy that this matter has been resolved with the SEC,” he said.

(Arun Kumar can be contacted at arun.kumar@ians.in)