Manager of Miami hedge fund started with UM professors sentenced in $1.3 million fraud
A Miami man who pulled off a $1.35 million fraud with a hedge fund he started with two University of Miami professors will spend at least 3 1/2 years in federal prison.
U.S. Judge Robert Scola sentenced David Coggins, 42, to 51 months of incarceration and $1.35 million in restitution on Friday, May 14, after Coggins pleaded guilty to one count of securities fraud. As federal prisoners serve at least 85% of their sentence, Coggins will be in for at least 43 months, three years and seven months. He reports to prison on July 5.
According to state records and court documents, Coggins, UM Herbert Business School finance professor Alok Kumar and assistant professor Jawal Addoum started Coral Gables Asset Management (CGAM) in 2014. By the end of 2016, Kumar and Addoum had pulled out and Coggins began luring investors with false claims of CGAM’s success and financial health, then helped himself to the money.
“From on or about September 2016 through on or about December 2020, Coggins misappropriated investor funds for his personal purposes and concealed from investors the Fund’s performance losses and his misappropriation of Fund assets to avoid detection and further his unjust enrichment,” Coggins’ admission of facts states.
“Specifically, Coggins did not tell the investors that the net asset value of the Fund was nearly zero in 2020. The loss to investors who were unable to recover their investments as a result of the scheme is $1,305,000.”
The Securities and Exchange Commission civil complaint against Coggins said he suckered a $100,000 investment from one party in 2018, then “wired $15,000 to his divorce lawyers, withdrew $3,700 in cash, and made a car payment on his BMW. Over the next thirty days, Coggins used over $14,000 of Investor No. 1‘s money for expensive restaurants, air travel, hotels, and shopping. By the end of November 2018, only $58,683 of (the investor’s) money remained in the account.”
Investors want money from Coggins and UM professors
As Coggins’ fraud reaches the end of its criminal court path, two of the civil court actions against him have come to a head.
Court clerks put in entries of default on April 28 after Coggins failed to answer federal civil lawsuits from California investor Steven Smith and Portuguese investor Nuno Alpendre. On Tuesday, as directed by the court, Smith and Alpendre filed motions for default judgment, Smith asking for his $150,000 investment and $450,000 punitive damages, and Alpendre asking for his $200,000 investment and $600,000 punitive damages.
A civil suit remains in Miami-Dade against Coggins, a 2014 MBA graduate from UM; Kumar (who removed Coral Gables Asset Management from his online UM profile only after the last Miami Herald story on Coggins’ fraud); and Addoum, now a Cornell University assistant professor of finance.
The plaintiffs in that suit are Ted Christakos; Targeted Investments, Christakos’ company with Mario Facella; and Robert Schwarz, a trustee for the Helen H. Kleban Irrevocable Trust. Not only do they want to get into Coggins’ wallet for the fraud, they want something from Kumar and Addoum.
These investors say besides Kumar and Addoum being their reason for investing in CGAM — Coggins’ letter to Judge Scola says Kumar’s research and strategies were what could make CGAM different from other hedge funds — the two ducked out in late 2016 without saying anything to investors. The investors believe Kumar and Addoum knew what Coggins was doing and saved themselves.
“In fact, plaintiffs did not learn that Kumar and Addoum had left the fund until Aug. 7, 2019,” the suit claims. “In the minimum, Kumar and Addoum had the fiduciary duty to place plaintiffs on notice of the fraudulent acts of Coggins, to have advised plaintiffs that they had received their investments out of the “Hedge Fund” and that they had allegedly removed themselves from their positions as founders, managers, officers, principals and/or partners.”
This story was originally published May 20, 2021 at 7:41 AM.
