The Securities and Exchange Commission (SEC) has announced the filing of a lawsuit against Craig Allen, alleging fraud against investors of The Cheetah Fund L.P., an Atlanta-based hedge fund founded and controlled by Allen.

According to the SEC's complaint, from January 2019 to January 2023, Allen raised approximately $9.9 million from investors of The Cheetah Fund by falsely claiming exceptional performance of the fund. In reality, Allen incurred trading losses of $4.59 million in accounts of The Cheetah Fund and C.M. Allen (another related company controlled by Allen).

The complaint also alleges that Allen falsely represented to investors that The Cheetah Fund used a specific accounting firm as its auditor and prepared its K-1 tax forms.

According to the SEC, Allen's compensation from managing The Cheetah Fund's investment portfolio was performance-based, meaning he would only be compensated when the fund was profitable. However, despite substantial trading losses, resulting in minimal legitimate compensation, Allen received at least $2.64 million from The Cheetah Fund and its investors.

The SEC claims that to date, Allen has only returned approximately $900,000 to investors of The Cheetah Fund, resulting in investor losses of about $9 million.

The complaint was filed in the Northern District of Georgia federal court, alleging violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.

The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and permanent officer and director bars against Allen. The SEC also seeks a permanent injunction prohibiting Allen from participating in the issuance, purchase, offer, or sale of any securities but allowing him to engage in buying and selling in his personal accounts.