Yorkville Advisors SEC Case: Summary Judgment and Dismissal

The Yorkville Advisors SEC case was a 2012 civil enforcement action in which the Securities and Exchange Commission accused the New Jersey hedge fund advisory firm, its founder Mark Angelo, and its chief financial officer Edward Schinik of inflating the value of hard-to-price investments to conceal losses and collect millions in excess fees. After six years of litigation, Judge George B. Daniels of the U.S. District Court for the Southern District of New York gutted the SEC’s case on summary judgment in March 2018, and the parties stipulated to dismissal of the remaining claims with prejudice weeks later. No penalties, sanctions, or disgorgement were imposed.¹

What the SEC Alleged

The SEC filed its complaint on October 17, 2012, styled SEC v. Yorkville Advisors, LLC, Mark Angelo, and Edward Schinik.² Yorkville was the seventh case to emerge from the SEC’s Aberrational Performance Inquiry, an initiative that used risk analytics to flag hedge funds reporting returns inconsistent with their stated strategies or with market conditions. Bruce Karpati, then chief of the SEC’s Asset Management Unit, said the firm’s performance placed Yorkville “front and center on our radar screen.”³

At the heart of the complaint were 15 portfolio positions. They represented only about 7% of the firm’s roughly 265 holdings, but roughly 33% of total assets. These were illiquid, privately negotiated instruments — convertible debentures, warrants, and convertible preferred securities issued by micro-cap and distressed companies — that lacked observable market prices.⁴

According to the SEC, beginning in mid-2008, Yorkville and Schinik, who chaired the firm’s valuation committee, changed how they valued these investments. Rather than pricing them at fair market value, the firm “simply valued the vast majority of the convertibles at their face value.”⁵ The SEC claimed this practice caused overvaluation of at least $50 million as of December 2008 and $47 million as of December 2009.⁶

One example cited in the complaint was an investment in Levitz Furniture, which Yorkville valued at $17 million even after the company had filed for bankruptcy. The firm ultimately recovered about $2 million in intellectual property and settled its bankruptcy claim for $1.285 million.⁵

Beyond the valuations themselves, the SEC accused the defendants of ignoring the firm’s own stated valuation policies, disregarding negative information about investments, withholding adverse data from auditors, and misleading investors about the use of third-party valuation firms and about the funds’ liquidity. The complaint alleged those misrepresentations drew in more than $280 million from pension funds and funds of funds and allowed Yorkville to collect at least $10 million in excess management and incentive fees.⁷

Who Was Charged

The SEC brought its claims under three federal statutes. Yorkville Advisors was charged with violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1), (2), and (4) of the Investment Advisers Act along with Rule 206(4)-8. Angelo faced the same charges plus aiding-and-abetting counts. Schinik was charged under Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and with aiding and abetting the firm’s violations.⁷

The remedies the SEC sought were the usual package: permanent injunctions, disgorgement of profits, and civil penalties.⁷

How the Case Fell Apart

Judge Daniels denied the defendants’ motion to dismiss in August 2013, and the case moved into years of discovery and expert-witness disputes.² Two rulings then reshaped the case.

The Expert Exclusion

The defendants moved to preclude the SEC’s expert from testifying about the “value” of the disputed assets. Judge Daniels granted the motion, barring the expert’s valuation opinions while allowing testimony on other subjects.⁴ The entire fraud theory rested on proving that the 15 positions had been overvalued. Without an expert permitted to opine on what those bespoke, illiquid assets were actually worth, the SEC’s ability to prove overvaluation was severely constrained.

Summary Judgment

On March 29, 2018, Judge Daniels issued his summary judgment ruling in SEC v. Yorkville Advisors, LLC, 305 F.Supp.3d 486 (S.D.N.Y. 2018). The court found that internal and external reviews of Yorkville’s valuations “never showed any evidence of fraud or deceit,” that the SEC had “misinterpreted the evidence,” and that the record was “replete with instances” contradicting the SEC’s claim that the firm had not used financial models to determine valuations. The court concluded that Yorkville’s valuation committee had made subjective judgments on illiquid, customized assets consistent with its responsibilities, and that no evidence supported the SEC’s claims that anyone had been instructed to withhold information or delay write-downs.⁴

The disposition by defendant was as follows:

Angelo received summary judgment on all claims except negligence-based claims under Sections 17(a)(2), 17(a)(3), 206(4), and Rule 206(4)-8. The SEC could proceed only on two narrow representations, the “December 2 Cash Statement” and the “Pluris Engagement Representation.”
Schinik was denied summary judgment on all claims, but the SEC was limited to proceeding only on the Pluris Engagement Representation.
Because the firm’s liability was derivative of the individuals, Yorkville itself could be pursued only on those same narrow grounds.⁴

The broad valuation-fraud theory that justified six years of litigation was rejected. Two narrow factual disputes remained.

Dismissal With Prejudice

Less than two months later, on May 18, 2018, Judge Daniels approved a joint stipulation dismissing all remaining claims against all defendants with prejudice.⁸ No sanctions, penalties, or disgorgement were imposed.¹ The SEC published the dismissal in a litigation release dated October 29, 2018. Angelo publicly characterized the case as “baseless” and treated the outcome as vindication.⁹

Why This Outcome Was Unusual

Yorkville stands out as a rare outright loss for the SEC in a hedge-fund valuation fraud case. Comparable enforcement actions from the same era generally ended in settlements, guilty pleas, or convictions. The Infinity Q Capital Management case produced a 15-year prison sentence for its chief investment officer and roughly $22 million in forfeitures. The Premium Point Investments matter ended with its founders convicted and sentenced to 50 and 40 months for a $100 million overvaluation scheme.¹⁰ Against that backdrop, a federal judge finding that the SEC had “misinterpreted the evidence” was an unusual rebuke.

The case also showed the evidentiary difficulty of proving fraud in bespoke, illiquid assets. When there is no observable market price, showing that an internal valuation is not just wrong but fraudulently wrong is a high bar. The exclusion of the SEC’s valuation expert widened the gap between allegation and admissible proof.

Yorkville After the Case

Angelo founded the firm in 2001 as Cornell Capital Partners, with the funds renamed under the Yorkville banner in July 2007.⁵¹¹ The core business was private investments in public equities, or PIPEs, with the firm lending to small and micro-cap companies against convertible notes.

Schinik, who had joined in December 2005 as CFO, COO, and chair of the valuation committee, is no longer employed at Yorkville, according to the firm’s website.¹² The firm survived the litigation and continues to operate. Yorkville Advisors Global, LP is a registered investment adviser with the SEC, with an effective registration date of July 15, 2022.¹³ As of December 31, 2024, the firm reported approximately $632 million in regulatory assets under management.¹⁴ In April 2025, an affiliate, Yorkville Securities, LLC, was approved by the SEC and FINRA as a registered broker-dealer.¹⁵

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SECActions. SEC, Yorkville Advisors Stipulate to Dismissal of Action Against Adviser
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CourtListener. Securities and Exchange Commission v. Yorkville Advisors, LLC
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SEC. SEC Charges Yorkville Advisors Hedge Fund Advisory Firm With Fraud
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vLex. SEC v. Yorkville Advisors, LLC, 305 F.Supp.3d 486
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Forbes. SEC Charges Formerly $1 Billion Yorkville Advisors Hedge Fund With Fraud and Bogus Valuations
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SECActions. SEC Asset Valuation Claims Rejected on Summary Judgment
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SEC. SEC Litigation Release No. 24326
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Regulatory Compliance Watch. Vindication Arrives for Former Adviser Six Years After Declaring SEC Case Baseless
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Debevoise & Plimpton. Recent Remarks Signal Renewed Focus on Private Fund Adviser Valuations
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Wealthmanagement.com. NJ-Based Yorkville Advisors Affiliate to Be RIA on Trump Media’s Financial Venture
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Yorkville Advisors. Form ADV Part 2A Brochure
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