TCA Liquidating Fund Amid SEC Probe, Whistleblower Complaint

TCA Management Group, a South Florida-based hedge fund and business lender, is shutting down its main investment fund, stating that clients have asked for more cash than is available.

The announcement comes after TCA employees filed an SEC whistleblower complaint alleging that the TCA Fund Management Group’s Global Credit Master Fund, which lends money to distressed companies, has inflated the hedge fund’s earnings and assets since 2017.

The Securities and Exchange Commission (SEC) is investigating the company’s accounting practices.

TCA sent a letter to investors that stated:

“In light of these redemption requests and the increasing illiquid nature of the Funds … as well as issues relating to accounting and revenue recognition policies that have been raised in connection with an ongoing SEC investigation … the Investment Manager has determined that the continued operation of the Funds is no longer commercially viable.”

TCA Fund’s Direct Lending

TCA’s Global Credit Master Fund engaged in high interest direct lending to distressed small and medium size companies who may not be able to get loans from banks. This type of lending is high-risk, but the potentially higher-than-average returns are appealing to investors. TCA claims it has made gains of 7% to 8% in recent years.

The employees who filed the whistleblower complaint say that TCA wasn’t booking losses on bad loans and recorded fee revenues that it would never get. They claim that a proper accounting of its holdings would add up to about $300 million in assets under management, of which only about $60 million are performing, and return a meager 1.92% annually.

TCA Alleged To Record Fees It Doesn’t Receive

An NBC News article on the TCA implosion gives a specific example of the type of activity alleged in the SEC whistleblower complaint: In 2018, a business owner in Alaska received a $3 million loan from TCA. She signed a document stating that she might pay TCA $1.45 million for investment banking services. TCA never provided the services and the business owner never paid them the money, yet TCA allegedly reported $1.45 million earned in fees from her business.

The whistleblowers claim that TCA restated its earnings for the Global Master Credit Fund after a routine SEC exam found irregularities. They filed their complaint out of a fear that the SEC did not understand how deep the problems were.

TCA Investors May Be Able To Recover Losses

The minimum investment in the TCA fund is $100k. To judge a hedge fund like TCA, investors frequently look to outside auditors. For 2018’s numbers, TCA’s auditor Grant Thornton listed assets at the fund as questionable in a qualified opinion.

The whistleblowers, who are reportedly on paid leave, said that TCA has raised $20 million recently for a new fund called Credit Strategies.

Explore Your Legal Rights

Our class action attorneys represent plaintiffs in claims against hedge funds, investment advisors, banks, and others for potential violations of the federal or state securities laws.

Whistleblowers are eligible to receive a financial award when their original, non-public information leads to a successful enforcement action and a sanction of $1 million or more.

Investors trying to liquidate their holdings in the Global Credit Master Fund will likely suffer losses. If you were referred to TCA by a FINRA-registered broker, you may be able to recover your losses through FINRA arbitration.

At Silver Law Group, our nationally-recognized securities and investment fraud attorneys assist investors throughout the U.S. We are ready to help you investigate the details of your situation and determine a course of action that is tailored to your needs and goals. Contact us at (800) 975-4345 or through our online form for a free consultation with a securities fraud attorney.