Detroit Equity Fund owner charged with defrauding investors of over $27 million | USAO-EDMI

DETROIT – An equity fund CEO has been accused of defrauding investors of more than $27 million by fraudulently exaggerating his fund’s investment performance and embezzling funds, the U.S. attorney announced today Dawn N.Ison.

Ison was joined in the announcement by James A. Tarasca, special agent in charge of the Detroit Field Division of the Federal Bureau of Investigation.

Andrew H. Middlebrooks, 30, of Dallas, Texas, the former majority owner, managing director, chief investment officer and portfolio manager of EIA All Weather Alpha Fund 1 Partners (EIA) is charged in a criminal information with a charge of wire fraud. For a significant portion of the program, Middlebrooks resided in the Detroit metro area. The information accuses the fact that from May 2017 to May 2022, Middlebrooks solicited clients for EIA, telling them that he was able to exploit “inefficiencies” in global equity markets, which would result in significant returns. for investors. Early on in the scheme to defraud, however, EIA’s fund failed to produce expected returns and suffered catastrophic losses.

Instead of informing existing EIA investors that the fund was failing, Middlebrooks solicited new investors with false claims about the fund’s performance and lied to existing investors by lying to them about the returns generated by their investments. Middlebrooks also created and distributed bogus documents claiming that EIA’s performance was exceptional. In a document, created in the fall of 2019, Middlebrooks falsely claimed that EIA’s track record included a cumulative return of 476.81% with 81.82% of monthly trades showing profit.

Middlebrooks also lied to investors about how their money would be used. During the scheme, Middlebrooks regularly withdrew money from the fund for living expenses and transferred money from the fund to his wife’s business. In the spring of 2022, Middlebrook’s fraud scheme began to unravel and EIA’s fund collapsed. Losses for at least 100 investors exceeded $27 million.

“Middlebrooks used a seemingly legitimate business, sophisticated methods and an intricate web of lies to deceive his victims, but his crime is nothing more than theft and unbridled greed. Middlebrooks’ ability to convince victim-investors that his false promises were true allowed him to steal their money,” said U.S. Attorney Dawn N. Ison. “Today’s charge demonstrates our commitment to ensuring the integrity of our financial systems.”

“Mr. Middlebrook allegedly lied and stole money from investors and potential investors by providing false financial statements and inflating fund returns,” said James A. Tarasca, special agent in charge of the FBI’s Detroit Division. “This case is an example of the FBI’s commitment to working with our partners to investigate those involved in financial fraud and to protect the financial well-being of honest, hard-working Americans.”

Middlebrooks faces the following maximum legal penalties: 20 years in prison, a $250,000 fine and up to 3 years of probation. A federal district court judge will determine any sentence after considering US sentencing guidelines and other statutory factors.

The investigation of this case was led by the Federal Bureau of Investigation. The United States Attorney’s Office and the Federal Bureau of Investigation would like to thank the Securities and Exchange Commission for their assistance.

Robert D. Coleman