UNITED STATES OF AMERICA

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SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 9326 / May 29, 2012

INVESTMENT ADVISERS ACT OF 1940

Release No. 3408 / May 29, 2012

INVESTMENT COMPANY ACT OF 1940

Release No. 30085 / May 29, 2012

ADMINISTRATIVE PROCEEDING

File No. 3-14893

ORDER INSTITUTING

ADMINISTRATIVE AND CEASE-ANDDESIST PROCEEDINGS PURSUANT

TO SECTION 8A OF THE

SECURITIES ACT OF 1933, SECTIONS

203(e), 203(f), AND 203(k) OF THE

INVESTMENT ADVISERS ACT OF

1940, AND SECTION 9(b) OF THE

INVESTMENT COMPANY ACT OF

1940, MAKING FINDINGS, AND

IMPOSING REMEDIAL SANCTIONS

AND CEASE-AND-DESIST ORDERS

In the Matter of

QUANTEK ASSET MANAGEMENT, LLC,

BULLTICK CAPITAL MARKETS

HOLDINGS, LP, JAVIER GUERRA, and

RALPH PATINO,

Respondents.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in

the public interest that public administrative and cease-and-desist proceedings be, and hereby

are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), Sections

203(e), 203(f), and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”), and

Section 9(b) of the Investment Company Act of 1940 (“Investment Company Act”) against

Quantek Asset Management, LLC (“Quantek”), Bulltick Capital Markets Holdings, LP

(“Bulltick”), Javier Guerra (“Guerra”), and Ralph Patino (“Patino”) (collectively

“Respondents”).

II.

In anticipation of the institution of these proceedings, Respondents have submitted

Offers of Settlement (the “Offers”) which the Commission has determined to accept. Solely for

the purpose of these proceedings and any other proceedings brought by or on behalf of the

Commission, or to which the Commission is a party, and without admitting or denying the

findings herein, except as to the Commission’s jurisdiction over them and the subject matter of

these proceedings, which are admitted, Respondents consent to the entry of this Order

Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the

Securities Act of 1933, Sections 203(e), 203(f), and 203(k) of the Investment Advisers Act of

1940, and Section 9(b) of the Investment Company Act of 1940, Making Findings, and

Imposing Remedial Sanctions and Cease-and-Desist Orders (“Order”), as set forth below.

III.

On the basis of this Order and Respondents’ Offers, the Commission finds 1 that:

Summary

This case involves a prominent Latin American-focused hedge fund adviser named

Quantek that misled investors about three important attributes of funds that it managed:

management “skin in the game,” the funds’ investment process, and certain related-party

transactions. At its peak, Quantek managed over $1 billion in assets, primarily through the

Quantek Master Fund, SPC Ltd. and its two feeder funds, Quantek Opportunity Fund, L.P. and

Quantek Opportunity Fund, Ltd. (collectively the “Opportunity Funds”).

First, from 2006 through 2008, Quantek made various representations to the effect that

its principals had “skin in the game” along with investors in the Opportunity Funds. “Skin in

the game,” in the managed fund context, means that the adviser or its principals invest their own

money in the fund. Many fund investors consider this an important way to align the adviser’s

interests with their own, resulting in stronger discipline and risk management. In fact,

Quantek’s principals never invested their own capital in the Opportunity Funds. Quantek made

these misstatements in due diligence questionnaires and in side letter agreements executed with

certain institutional investors.

Second, from 2007 through 2008, Quantek misled investors about the rigor of the

Opportunity Funds’ investment process. The funds used an asset-based lending strategy, with a

focus on industrial and real estate ventures in Latin America. Because the funds’ loans were

complex and illiquid, investors carefully evaluated Quantek’s process for making investments.

Quantek told investors that all of the funds’ investments required approval by a committee of

Quantek principals, and that the committee reviewed formal memoranda explaining each

proposed investment before it was made. Quantek also told its largest investor that committee

The findings herein are made pursuant to Respondents’ Offers of Settlement and are not

binding on any other person or entity in this or any other proceeding.

members documented their approval by signing the memoranda. In reality, Quantek failed to

prepare investment committee memos for numerous transactions. In 2007, the funds’ largest

investor requested copies of the investment committee memos. Quantek responded by creating,

backdating, and signing the missing memos, giving this investor – and others later – the

misimpression that Quantek had been following its purportedly robust process all along.

Third, from 2007 through 2010, Quantek provided investors with inaccurate information

about certain related-party transactions by the funds. Because the Opportunity Funds permitted

related-party transactions with Quantek’s parent company, Bulltick, and other affiliates,

investors were wary of transactions that were not properly disclosed. In 2006 and 2007, the

funds made related-party loans to an affiliate of their portfolio manager, Javier Guerra, and to

Bulltick entities that were not properly documented or secured. Subsequently, Quantek and

Bulltick employees prepared and backdated the missing loan documents. Quantek employees

also created investment memos designed to appear as if they were drafted before the funds

made the loans. These materials inaccurately described key terms of the related-party loans and

gave the impression that the loans had been sufficiently documented and secured at all times.

Quantek provided these misleading documents, or their substance, to the funds’ investors in

various ways.

By its actions, Quantek violated certain antifraud, compliance, and recordkeeping

provisions of the Advisers Act and Securities Act. Quantek’s managing principal, Guerra, and

its former operations director, Ralph Patino, were responsible for making various

misrepresentations on Quantek’s behalf. Bulltick was responsible for aiding and abetting and

causing some of Quantek’s violations.

Respondents

Quantek Asset Management, LLC is a Delaware limited liability company with its

principal place of business in Miami, Florida. At all relevant times it was the investment

adviser for the Opportunity Funds. Quantek was a wholly owned subsidiary of Bulltick from

November 2006 until January 2009, and is now owned primarily by Javier Guerra. Quantek has

been registered as an investment adviser since June 2007.

Bulltick Capital Markets Holdings, LP is a Delaware limited partnership and the

successor to Bulltick Capital Markets, LP, a Scottish limited partnership founded by Javier

Guerra and his associates. Bulltick Capital Markets, LP was the Bulltick entity in existence at

the time of the events described herein. It was the parent company of Quantek and two

Commission registered broker-dealers.

Javier Guerra, age 41, resides in Miami, Florida. At all relevant times, Guerra was the

lead principal of Quantek and the portfolio manager for the Opportunity Funds. Guerra was a

partner and managing director of Bulltick from 2000 until January 2009, when Bulltick and

Quantek separated. From at least 2006 through January 2009, an entity controlled by Guerra

owned approximately 30% of Bulltick.

Ralph Patino, age 46, resides in Miramar, Florida. At all relevant times, Patino was

Quantek’s director of operations. Patino was also Quantek’s head of compliance from

December 2006 through approximately spring 2007, when the firm began preparations to

Other Relevant Entity

The Opportunity Funds are hedge funds created in July 2005. The funds have a

master-feeder structure comprised of Quantek Master Fund, SPC Ltd. (offshore) and two feeder

funds, Quantek Opportunity Fund, L.P. (onshore) and Quantek Opportunity Fund, Ltd.,

(offshore). Quantek served as investment adviser to the funds from December 2006 until

September 2011. Prior to December 2006, the funds’ adviser was Quantek Financial (Cayman),

Ltd. At its peak in July 2008, the Opportunity Funds had over $1 billion in assets.

Facts

Background

Bulltick and Guerra formed Quantek in 2006 to serve as investment adviser to the

Opportunity Funds. The Opportunity Funds’ main investment strategy was asset-based

lending to finance various Latin American industrial and real estate ventures. The

Opportunity Funds grew quickly and, by mid-2008, had over $1 billion in assets and about

seventy investors, many of which were institutional.

Quantek and Bulltick failed to implement strong compliance practices at Quantek to

keep pace with the funds’ rapid growth. Quantek lacked a dedicated adviser compliance

function until spring 2008, almost a year after registering as an investment adviser. Between

June 2007, when Quantek registered, and spring 2008, Bulltick’s chief compliance officer and

Bulltick’s broker-dealer subsidiary compliance personnel were given responsibility for

Quantek’s compliance, even though they had virtually no experience or training concerning

registered investment advisers. They also lacked adequate time to perform all of their

additional compliance responsibilities including a review of Quantek’s due diligence

questionnaires and other correspondence with investors.

Misstatements Concerning “Skin in the Game”

From December 2006 through at least June 2008, Quantek made representations to

prospective investors that its principals had invested their own money in the Opportunity

Funds. Quantek made these representations in due diligence questionnaire responses and side

letter agreements with sought-after institutional investors. 2 In fact, none of Quantek’s

principals or affiliates had ever invested their own wealth in the Opportunity Funds.

These misrepresentations provided Quantek with a significant marketing benefit.

“Skin in the game,” also known as principal co-investment, refers to an adviser’s investment

Quantek did make accurate disclosures to other investors on the subject of principal co-investment.

in the fund or otherwise alongside fund investors and is widely viewed as an important way to

align a manager’s interests with its investors. Many fund investors consider principal coinvestment to be an important check on the manager, resulting in stronger investment

discipline and risk management practices. Prospective investors frequently inquire about

principal co-investment during their due diligence process, and many require it in their fund

selection.

Due Diligence Questionnaires

Quantek made misstatements concerning its principals’ investment in the Opportunity

Funds on due diligence questionnaires published by the Alternative Investment Management

Association (“AIMA”).

AIMA is an international non-profit trade association for the hedge fund industry.

Among the many publications it provides to members is a form due diligence questionnaire

titled, “Illustrative Questionnaire for Due Diligence Review of Hedge Fund Managers”

(“AIMA DDQ”). This questionnaire is commonly used throughout the industry. It is

designed to be completed by hedge fund managers and distributed to prospective investors.

The first page of the AIMA DDQ states that the form’s purpose is to “serve as a guide to

investors in their relations with hedge fund managers.”

From December 2006 through June 2009, Quantek completed several AIMA DDQs

and provided them to prospective investors in the Opportunity Funds.

The AIMA DDQs used by Quantek included a section titled “Management Team’s

Co-Investment” that contained the following questions:

What is the total amount invested by the principals/management in the

fund and other investment vehicles managed pari passu with the fund?

Has the management reduced its personal investment?

•

Date:

Amount:

Reasons:

Quantek’s operations director and then head of compliance, Patino, was responsible for

preparing Quantek’s AIMA DDQ to be issued in December 2006. Patino answered the first

question for Quantek by writing “$13 million.” He wrote “no” in response to the second

question concerning management reduction of personal investment. In fact, Quantek principals

and management had never invested in the Opportunity Funds or in any vehicle managed pari

passu with the Opportunity Funds. 3 Accordingly, Patino and Quantek’s “$13 million” answer

was incorrect. The correct response was “zero.”

The term pari passu is commonly used in the hedge fund industry. Its literal meaning is “of equal

step.” Quantek investors generally understood pari passu, in this context, to capture other investment vehicles

At the time he answered the AIMA DDQ Management Team Co-Investment questions,

Patino did not know the meaning of the term pari passu and spent very little time researching its

definition. Under an erroneous belief, Patino improperly counted certain unrelated investments

as if they were investments made pari passu with the Opportunity Funds. Patino sent the

completed draft AIMA DDQ answers to others at Quantek, including Guerra, for review and

comment. Later, Guerra sent Quantek’s AIMA DDQ responses to a prospective investor. That

prospective investor subsequently invested approximately $2 million in the Opportunity Funds.

Following the template set by Patino, Quantek and its third-party marketers provided

prospective investors with the incorrect AIMA DDQ responses from December 2006 through

June 2008. During that time, Patino and others at Quantek reduced the amount of Quantek’s

purported principal/management investment that was reported on AIMA DDQs from $13

million to $10 million in June 2007, and then to $7 million in December 2007. The correct

answer, however, was always “zero.” Furthermore, even though Quantek reduced the amount

of its purported principal co-investment, it consistently answered “No” to the question asking if

Quantek management had reduced their personal investment.

The Opportunity Funds’ investors who received AIMA DDQs continued to believe that

Quantek’s principals had a co-investment in the funds.

After Quantek registered as an investment adviser in June 2007, nearly a year passed

before anyone reviewed the firm’s AIMA DDQ responses for accuracy. During that period,

Quantek did not have its own compliance staff. Bulltick and Guerra undertook to provide

compliance resources to Quantek so it could meet its regulatory compliance obligations.

Therefore, from June 2007 through spring 2008, Quantek and Bulltick shared compliance

department employees, including a chief compliance officer. However, these shared employees

had virtually no registered investment adviser compliance experience and were not properly

trained in investment adviser regulatory issues. The employees also lacked sufficient time to

review the AIMA DDQs because they were responsible for all compliance work at two Bulltick

owned broker-dealers and Quantek, which by December 2007 was managing two separate

hedge funds and almost $1 billion in assets.

Eventually, in May 2008, Quantek hired a senior compliance manager with investment

adviser compliance experience. He reviewed its AIMA DDQ responses and concluded that

they should be changed. Accordingly, in an updated AIMA DDQ response dated June 2008,

Quantek changed its principal/management investment answer to “N/A.” In June 2009,

Quantek changed this response again to “Zero.” Quantek similarly changed its answer to the

second part, concerning management reduction of personal investment, from “No” to “N/A.”

Quantek also provided a prospective investor with misleading information about

principal co-investment in the Opportunity Funds on another type of due diligence

utilizing the same strategy and style as the Opportunity Funds so that their value rose or fell in unison with the

Opportunity Funds.

questionnaire. In December 2006, a prospective Opportunity Funds investor asked Quantek

to complete a separate due diligence questionnaire titled, “Operational Due Diligence

Questionnaire for Prospective Managers” (“Operational DDQ”). The Operational DDQ stated

in capital letters on its first page:

THIS QUESTIONNAIRE IS AN INTEGRAL PART OF OUR DUE

DILIGENCE PROCESS, NO INVESTMENT DECISIONS CAN OR

WILL BE TAKEN, WITHOUT THE SUPPORT OF THIS

COMPLETED DOCUMENT.

It contained the question: “Do the partners and employees have investments in the fund?

Please provide as much information as possible.” In response, Quantek stated that “[t]he

Directors of the Manager have position of (sic) the fund, which represents a significant

portion of their wealth.” Quantek answered another query, which sought a description of the

Opportunity Funds’ investor base, by indicating that investments from Quantek principals

accounted for 17% of the funds’ assets. Quantek personnel prepared these inaccurate

responses based on the firm’s incorrect AIMA DDQ answers. In fact, none of Quantek’s

principals had invested in the Opportunity Funds. Less than two months after it received

Quantek’s misleading AIMA DDQ and Operational DDQ answers in December 2006, the

prospective investor made a $2.5 million investment in the Opportunity Funds.

Side Letter Agreements with Institutional Investors

In early 2007, two large institutional investors were considering investments in the

Opportunity Funds. During the course of due diligence, one investor received Quantek’s

inaccurate AIMA DDQs concerning principal/management co-investment. The other investor

received the same inaccurate information during a site visit to Quantek’s offices. As a result,

both investors operated with the understanding that Quantek’s principals maintained a coinvestment in the Opportunity Funds. Before investing, both investors separately sought

assurances that they would be notified promptly if Quantek’s principals significantly reduced

their investments in the Opportunity Funds.

To memorialize their requirements, both investors sought and obtained side letter

agreements from Quantek. The side letter with the first investor stated:

[Quantek] . . . agrees to (i) provide 2 business days written notice . . .

and (ii) waive the standard notice period and accelerate the redemption

date . . . if . . . Javier Guerra withdraws 20% or more of his investment in

the Fund . . . .

The side letter with the second investor contained similar provisions in the event that

“Quantek principals” redeemed 25% percent or more of their investment in the Opportunity

Funds. Guerra executed both side letter agreements on behalf of Quantek and the Opportunity

Funds.

These side letter agreements implied that Quantek’s principals, including Guerra, had

investments in the Opportunity Funds when in fact they did not. After receiving these side

letters, the two investors allocated nearly $100 million in combined capital to the Opportunity

Funds.

Misrepresentations Concerning Investment Process

Quantek’s investment process for the Opportunity Funds was particularly important to

investors. Unlike funds that traded liquid securities on a public exchange, the Opportunity

Funds made unique private investments that were illiquid. The funds’ loans typically were

secured by tangible assets or cash flows, and were subject to foreign law. In addition, Quantek

was a relatively new adviser without an established performance record. For these reasons,

many investors carefully evaluated Quantek’s process for making investments on behalf of the

Opportunity Funds.

Quantek’s Stated Investment Process

Quantek’s primary seed investor in the fall of 2006 was a large institutional hedge fund

(“Seed Investor”). The Seed Investor made a number of requests that it wanted Quantek to

satisfy before it would invest in the Opportunity Funds. One such request was that Quantek

adopt a robust investment approval process. At the Seed Investor’s request, Quantek formalized

its investment process so that a committee would make investment decisions for the funds. This

investment committee was comprised of five members: Guerra (chairman), two other Bulltick

partners, Patino, and another senior Quantek employee.

According to the funds’ offering documents, Quantek was to rely on the investment

committee when making investment decisions for the funds, and all investments required

approval from at least four committee members. Guerra assured the Seed Investor that all

Opportunity Funds investments would be approved in advance by the investment committee,

and that the committee would memorialize its decisions. Once Quantek committed to

implementing this process, the Seed Investor allocated tens of millions of dollars to the

Opportunity Funds.

Quantek made additional representations to prospective investors about its investment

approval process. Beginning in December 2006, Quantek stated in AIMA DDQ responses and

elsewhere that, as part of the approval process, a formal investment memorandum was prepared

and presented to the investment committee for final consideration before each investment was

made. These memoranda were to describe the proposed transactions and ask the investment

committee to approve them. Patino also told the Seed Investor in June 2007 that when the

investment committee approved a transaction, its members who voted for approval executed the

investment memo for that transaction. Patino further indicated that there was no need for

Quantek to prepare minutes of investment committee meetings because executed investment

memos performed the same function. The investment memos, among other purposes, served to

memorialize the decisions of the investment committee as part of the process Quantek promised

the Seed Investor it would follow.

Failure to Follow Stated Investment Process

The Opportunity Funds grew very quickly. In mid-2006, the funds had about $10

million in assets and three investors. By June 2007, the funds had approximately $635 million

in assets and almost 60 investors. The Opportunity Funds’ rapid growth, however, coincided

with a period of great disorganization at Quantek. Quantek had no standard procedure for

maintaining the Opportunity Funds’ investment documents and did not keep them in a

centralized location. Many times Quantek employees could not readily locate investment

documentation for reference.

Quantek’s growth and disarray had an impact on the Opportunity Funds’ investment

approval process. During the first six months of 2007, Quantek repeatedly failed to follow the

process that it had described to investors and prospective investors. Specifically, Quantek made

at least fifteen investments for the Opportunity Funds without first preparing and submitting a

memorandum to the investment committee. These investments accounted for about $350

million, or more than half, of the Opportunity Funds’ total portfolio value by June 2007.

The Seed Investor had a practice of conducting periodic due diligence reviews of the

Opportunity Funds’ portfolio. During one of these reviews in June 2007, a director of the Seed

Investor asked Patino, Guerra, and others at Quantek for copies of the investment memoranda.

None of the Quantek employees responded candidly that many of the investment memos did not

exist. Instead, Quantek held off the Seed Investor to allow time for employees to prepare the

missing investment memos. The newly-created memos described past Opportunity Funds

investments in the future tense and purported to seek committee approval for deals that had

already occurred. The memos also gave the impression that the committee’s review and

approval process was far more rigorous than it actually was. Guerra knew that Quantek

employees were preparing after-the-fact investment memos for the Seed Investor in this way.

Nevertheless, Guerra signed the memos along with other committee members so that Quantek

could provide the Seed Investor with fully executed copies. Quantek provided these memos to

the Seed Investor in June 2007. As a result, for the fifteen transactions in question, Quantek

gave the Seed Investor the erroneous impression that the memos were authentic in describing

the investment process and committee action.

Quantek generally prepared timely investment memoranda for investments made after

June 2007. However, through the fall of 2007, Quantek personnel continued drafting after-thefact memoranda for investments made prior to June 30, 2007. In addition, Quantek personnel

provided the misleading memos to other investors and prospective investors conducting due

diligence reviews of Opportunity Funds investments. The memos suggested that Quantek was

following a robust, documented investment process, when in fact Quantek had frequently

deviated from that process.

Misrepresentations Concerning Related-Party Transactions

The Opportunity Funds’ asset-based lending strategy presented potential conflicts of

interest between the funds and Quantek’s affiliates, including its Bulltick parent company.

Bulltick sometimes originated potential investments for the Opportunity Funds. Recognizing

this, the funds’ offering documents permitted them to make transactions with Bulltick and other

Quantek affiliates, including companies owned by Guerra. However, the Opportunity Funds’

investors were wary of related-party transactions between the funds and Quantek’s affiliates.

In 2006 and 2007, the Opportunity Funds made related-party loans to Bulltick entities

and a separate Guerra-controlled company that were not properly documented or secured by

collateral under the loan terms. Subsequently, Quantek and Guerra provided investors with

misleading information about the timing and terms of these loans. Bulltick assisted Quantek

and Guerra by creating written agreements for the loans that did not reflect the actual

transactions and by permitting its subsidiaries to execute those agreements.

The “Equus” Loan

In August 2006, Guerra exercised his authority as portfolio manager to direct the

Opportunity Funds to make an $800,000 loan to a company he controlled for a real estate

investment in New York City. The loan was reflected in the Opportunity Funds’ records and

repaid in full with interest by Guerra’s affiliate company in 2008. However, Quantek and

Guerra did not properly document the loan at the time it was made.

Before executing a loan agreement, Guerra wanted to ensure that the loan did not have

negative tax implications for the Opportunity Funds. In early 2007, after these tax issues were

resolved, Guerra signed a loan agreement on behalf of the Opportunity Funds. The underlying

real estate investment was made by the Guerra-controlled company and had nothing to do with

Bulltick or its subsidiaries. However, the loan agreement that Guerra executed inaccurately

stated that the Opportunity Funds had made the loan to an entity called Equus Capital Partners,

LP (“Equus”), which was a Bulltick subsidiary. The loan agreement also stated – incorrectly –

that the loan was secured by “commissions” that Equus anticipated receiving, when in fact

Equus’s business did not actually involve the receipt of commissions. The agreement bore the

date on which the loan was made in August 2006, rather than the date when the loan agreement

was prepared and executed in 2007.

Guerra arranged for other Bulltick partners to execute the loan agreement and a

similarly inaccurate loan note on behalf of Equus. As a result, Bulltick permitted its Equus

subsidiary to enter into a related-party loan agreement with the Opportunity Funds that did not

reflect the actual transaction. Instead of the loan documentation properly reflecting the funds’

$800,000 unsecured loan to Guerra’s affiliate, the documents showed that the funds had made a

nondescript secured loan to a Bulltick subsidiary called Equus.

Quantek and Guerra provided investors with untrue information about the loan. From

June 2007 through July 2008, Quantek sent investors portfolio reports that referenced an

“Equus” investment, even though the loan had nothing to do with Equus. For much of that time

period, the same portfolio reports stated that the “Equus” investment was in Latin America

when, in fact, Guerra’s affiliate company received the loan and used it to purchase a building in

New York City. In November and December 2007, Guerra personally provided some of the

funds’ investors with portfolio statements repeating the inaccurate borrower and collateral

information in the backdated Equus loan documents. In January 2010, Quantek further

provided the inaccurate loan documents to a forensic accounting firm retained by a committee

of large investors in the Opportunity Funds to evaluate the funds’ related-party loans.

Inaccurate information about the Opportunity Funds’ loan to Guerra was also reflected on

Quantek’s internal records including its general ledger and trial balance for the Opportunity

Funds.

The ERV Loan

Quantek and Guerra misled investors about another related-party transaction, a loan

from the Opportunity Funds to an inactive Bulltick subsidiary called ERV Investments, LLC

(“ERV”). Bulltick provided assistance by creating written agreements for the loan that did not

reflect the actual transactions and permitting its subsidiaries to execute those agreements.

In March 2007, the Opportunity Funds made a $10 million related-party loan to ERV.

The purpose of the loan was to enable Bulltick, through the ERV special purpose vehicle, to

provide initial capital to a new hedge fund that Quantek was forming. The loan documentation

was executed by Guerra (on behalf of the funds) and other Bulltick partners (on behalf of ERV).

To secure repayment of the Opportunity Funds’ $10 million loan, Bulltick pledged its

ownership shares of ERV as collateral. However, ERV had no assets, no cash flows, and no

other value apart from the loan proceeds it had just received.

After receiving the loan, Bulltick caused ERV to make a $7 million investment in the

new hedge fund. The rest of the $3 million in loan proceeds were transferred to Bulltick and

used for working capital. At this point, the Opportunity Funds’ original $10 million loan was

under-secured by the ERV shares because ERV’s only asset was the $7 million subscription in

the new fund.

In June 2007, Bulltick caused ERV to assign the Opportunity Funds’ loan to Bulltick

itself, along with the $7 million subscription in the new hedge fund. Bulltick was now the

borrower while ERV was once again an empty vehicle. However, in the loan assignment

process, Bulltick failed to modify the original security agreement to ensure that valuable

collateral would secure the funds’ loan. Instead, the only collateral securing the loan was

Bulltick’s ownership stake in ERV, which was worthless. As a result, the Opportunity Funds’

original loan to ERV was effectively unsecured. Bulltick ultimately repaid the loan in full with

interest in 2009.

Guerra and Quantek provided the Opportunity Funds’ investors with erroneous

information about the ERV loan collateral. In June 2007, Guerra and the other investment

committee members signed a backdated investment memo incorrectly stating that the loan was

to be secured by Bulltick shares, when in fact it was secured by ERV shares. The difference

was material, because ERV had no value at that time. The memo also stated that Bulltick would

hold $3 million of the loan proceeds as a “cash collateral agent,” when in fact Bulltick had

already used the $3 million for its working capital. Quantek personnel provided this memo to

various investors in the funds. Moreover, in November and December 2007, Guerra sent

investors portfolio reports stating incorrectly that the loan collateral was shares of ERV worth

$7.5 million, the value of the new hedge fund investment. In fact, the ERV shares had no value

because the fund investment had been assigned to Bulltick.

Finally, in June 2008, Guerra and other Bulltick partners signed backdated assignment

and pledge agreements for the Opportunity Funds’ loan to ERV. In spring 2008, Bulltick

personnel discovered that the documents assigning the loan from ERV to Bulltick had not been

finalized. Bulltick attempted to remedy the problem by preparing backdated assignment and

pledge agreements. Those documents incorrectly indicated that the ERV loan had been

assigned to Bulltick and secured by Bulltick shares as early as June 2007. In this manner,

Guerra, Quantek, and Bulltick made it appear as if the Opportunity Funds’ loan to ERV was

properly documented and secured with valuable collateral at all times. In September 2008,

Quantek provided these loan documents to a prospective investor that was conducting due

diligence on the funds’ related-party transactions. In January 2010, Quantek also provided

these documents to a forensic accounting firm that had been retained by a group of the

Opportunity Funds’ investors specifically to evaluate the funds’ related-party loans.

Violations

Sections 17(a)(2) and 17(a)(3) of the Securities Act

Section 17(a)(2) of the Securities Act specifically prohibits obtaining money or property

by means of any untrue statements of material fact or material omissions in the offer or sale of

securities. Section 17(a)(3) prohibits engaging in any transaction, practice, or course of

business which operates as a fraud or deceit upon the purchaser in the offer or sale of securities.

Establishing violations of Sections 17(a)(2) and 17(a)(3) does not require a showing of scienter;

negligence is sufficient. Aaron v. SEC, 446 U.S. 680, 697 (1980); SEC v. Hughes Capital

Corp., 124 F.3d 449, 453-54 (3d Cir. 1997).

As a result of the conduct described above, Quantek and Guerra willfully4 violated

Sections 17(a)(2) and 17(a)(3) of the Securities Act, and Patino willfully violated Section

17(a)(3) of the Securities Act.

Section 206(4) of the Advisers Act and Rule 206(4)-8 Thereunder

Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder prohibit investment

advisers from engaging in any act, practice, or course of business which is fraudulent,

deceptive, or manipulative, and from making any untrue statement of a material fact or omitting

to state a material fact necessary to make the statements made, in light of the circumstances

under which they were made, not misleading to investors or prospective investors in a pooled

investment vehicle. Scienter is not required to establish a violation of Section 206(4) and Rule

206(4)-8.

A willful violation of the securities laws means merely “‘that the person charged with the duty knows

what he is doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d

969, 977 (D.C. Cir. 1949)).

As a result of the conduct described above, Quantek and Guerra willfully violated

Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, and Patino willfully aided

and abetted and caused Quantek’s violations of Section 206(4) of the Advisers Act and Rule

206(4)-8 thereunder.

As a result of the conduct described above, Bulltick willfully aided and abetted and

caused Quantek’s violations of Section 206(4) of the Advisers Act and Rule 206(4)-8

thereunder.

Section 206(4) of the Advisers Act and Rule 206(4)-7 Thereunder

Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder require registered

investment advisers to adopt and implement written procedures reasonably designed to prevent

violations of the Advisers Act.

Quantek willfully violated Rule 206(4)-7 by failing to implement policies and

procedures reasonably designed to prevent the firm from making material misrepresentations to

investors. Quantek’s compliance policies required all of its correspondence with investors and

prospective investors to be reviewed for compliance with applicable laws and approved in

advance by its chief compliance officer. Quantek’s compliance staff lacked sufficient time to

review those marketing materials because of their other compliance responsibilities at Quantek

affiliates. In addition, prior to spring 2008, Quantek’s compliance employees, including its

chief compliance officer, had virtually no investment adviser compliance experience or training.

As a result, Quantek’s correspondence with investors and prospective investors was not

adequately reviewed and approved as required by its own compliance policies.

Both Bulltick and Guerra willfully aided and abetted and caused Quantek’s violations of

Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Guerra was the founder and

managing principal of Quantek as well as portfolio manager of the Opportunity Funds. Bulltick

established Quantek to serve as its hedge fund advisory subsidiary. Guerra and Bulltick knew

about Quantek’s regulatory compliance obligations and undertook to provide compliance staff

for the firm. However, they assigned compliance staff to Quantek that did not have the

necessary training, experience, and time to perform the required advisory compliance functions.

Section 204 of the Advisers Act and Rule 204-2(a)(7)

Section 204 of the Advisers Act requires that every investment adviser registered or

required to be registered maintain certain books and records. Rule 204-2(a)(7) requires that

registered investment advisers “make and keep true, accurate and current . . . originals of all

written communications received and copies of all written communications sent by such

investment adviser[s] relating to (i) any recommendation made or proposed to be made and any

advice given or proposed to be given, [and] (ii) any receipt, disbursement or delivery of funds

or securities . . . .”

Quantek willfully violated Section 204 of the Advisers Act and Rule 204-2(a)(7)

thereunder by failing to keep true, accurate, and current originals of written communications

with investors and others concerning certain of the Opportunity Funds’ related-party loans,

whose underlying source documentation was inaccurate.

As a result of the conduct described above, Bulltick and Guerra willfully aided and

abetted and caused Quantek’s violations of Section 204 of the Advisers Act and Rule 2042(a)(7) thereunder.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest

to impose the sanctions agreed to in Respondents’ Offers.

Accordingly, pursuant to Section 8A of the Securities Act, Sections 203(e), 203(f), and

203(k) of the Advisers Act, and Section 9(b) of the Investment Company Act, it is hereby

ORDERED that:

Respondent Quantek cease and desist from committing or causing any violations

and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Sections

206(4) and 204 of the Advisers Act and Rules 206(4)-8, 206(4)-7, and 204-2(a)(7) thereunder.

Respondent Guerra cease and desist from committing or causing any violations

and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Sections

206(4) and 204 of the Advisers Act and Rules 206(4)-8, 206(4)-7, and 204-2(a)(7) thereunder.

Respondent Bulltick cease and desist from committing or causing any violations

and any future violations of Sections 206(4) and 204 of the Advisers Act and Rules 206(4)-8,

206(4)-7, and 204-2(a)(7) thereunder.

Respondent Patino cease and desist from committing or causing any violations

and any future violations of Section 17(a)(3) of the Securities Act and Section 206(4) of the

Advisers Act and Rule 206(4)-8 thereunder.

Respondents Quantek and Bulltick are censured.

Respondent Guerra be, and hereby is:

barred from association with any broker, dealer, investment adviser, municipal

securities dealer, municipal advisor, transfer agent, or nationally recognized

statistical rating organization with the right to apply for reentry after five (5)

years to the appropriate self-regulatory organization, or if there is none, to the

Commission; and

prohibited from serving or acting as an employee, officer, director, member of an

advisory board, investment adviser or depositor of, or principal underwriter for, a

registered investment company or affiliated person of such investment adviser,

depositor, or principal underwriter with the right to apply for reentry after five (5)

years to the appropriate self-regulatory organization, or if there is none, to the

Commission.

Any reapplication for association by Guerra will be subject to the applicable

laws and regulations governing the reentry process, and reentry may be conditioned upon a

number of factors, including, but not limited to, the satisfaction of any or all of the following:

(a) any disgorgement ordered against Guerra, whether or not the Commission has fully or

partially waived payment of such disgorgement; (b) any arbitration award against Guerra

related to the conduct that served as the basis for the Commission order; (c) any self-regulatory

organization arbitration award against Guerra to a customer, whether or not related to the

conduct that served as the basis for the Commission order; and (d) any restitution order against

Guerra by a self-regulatory organization, whether or not related to the conduct that served as the

basis for the Commission order.

Respondent Patino be, and hereby is:

barred from association with any broker, dealer, investment adviser, municipal

securities dealer, municipal advisor, transfer agent, or nationally recognized

statistical rating organization with the right to apply for reentry after one (1) year

to the appropriate self-regulatory organization, or if there is none, to the

Commission; and

prohibited from serving or acting as an employee, officer, director, member of an

advisory board, investment adviser or depositor of, or principal underwriter for, a

registered investment company or affiliated person of such investment adviser,

depositor, or principal underwriter with the right to apply for reentry after one (1)

year to the appropriate self-regulatory organization, or if there is none, to the

Commission.

Any reapplication for association by Patino will be subject to the applicable

laws and regulations governing the reentry process, and reentry may be conditioned upon a

number of factors, including, but not limited to, the satisfaction of any or all of the following:

(a) any disgorgement ordered against Patino, whether or not the Commission has fully or

partially waived payment of such disgorgement; (b) any arbitration award against Patino related

to the conduct that served as the basis for the Commission order; (c) any self-regulatory

organization arbitration award against Patino to a customer, whether or not related to the

conduct that served as the basis for the Commission order; and (d) any restitution order against

Patino by a self-regulatory organization, whether or not related to the conduct that served as the

basis for the Commission order.

Respondents Quantek and Guerra, shall, jointly and severally, pay

disgorgement of $2,056,446 and prejudgment interest of $219,585 to the Securities and

Exchange Commission. Payment shall be made in the following installments: $1,138,016

within ten (10) days of the entry of this Order and $1,138,015 on or before October 1, 2012. If

any payment is not made by the date the payment is required by this Order, the entire

outstanding balance of disgorgement and prejudgment interest, plus any additional interest

accrued pursuant to SEC Rule of Practice 600, shall be due and payable immediately, without

further application. Payments shall be: (A) made by wire transfer, United States postal money

order, certified check, bank cashier’s check or bank money order; (B) made payable to the

Securities and Exchange Commission; (C) hand-delivered or mailed to the Securities and

Exchange Commission, Office of Financial Management, 100 F St., NE, Stop 6042,

Washington, DC 20549; and (D) submitted under cover letter that identifies Quantek and

Guerra as Respondents in these proceedings, the file number of these proceedings, a copy of

which cover letter and money order or check shall be sent to Scott Weisman, Assistant Director,

Asset Management Unit, Division of Enforcement, Securities and Exchange Commission, 100

F St., NE, Washington, DC 20549.

Respondent Quantek shall, within ten (10) days of the entry of this Order, pay a

civil money penalty in the amount of $375,000 to the Securities and Exchange Commission. If

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.

Payment shall be: (A) made by wire transfer, United States postal money order, certified check,

bank cashier's check or bank money order; (B) made payable to the Securities and Exchange

Commission; (C) hand-delivered or mailed to the Securities and Exchange Commission, Office

of Financial Management, 100 F St., NE, Stop 6042, Washington, DC 20549; and (D)

submitted under cover letter that identifies Quantek as a Respondent in these proceedings, the

file number of these proceedings, a copy of which cover letter and money order or check shall

be sent to Scott Weisman, Assistant Director, Asset Management Unit, Division of

Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.

Respondent Bulltick shall, within ten (10) days of the entry of this Order, pay a

civil money penalty in the amount of $300,000 to the Securities and Exchange Commission. If

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.

Payment shall be: (A) made by wire transfer, United States postal money order, certified check,

bank cashier's check or bank money order; (B) made payable to the Securities and Exchange

Commission; (C) hand-delivered or mailed to the Securities and Exchange Commission, Office

of Financial Management, 100 F St., NE, Stop 6042, Washington, DC 20549; and (D)

submitted under cover letter that identifies Bulltick as a Respondent in these proceedings, the

file number of these proceedings, a copy of which cover letter and money order or check shall

be sent to Scott Weisman, Assistant Director, Asset Management Unit, Division of

Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.

Respondent Guerra shall pay a civil money penalty in the amount of $150,000

to the Securities and Exchange Commission. Payment shall be made in the following

installments: $75,000 shall be paid within thirty (30) days of the date of this Order and another

$75,000 shall be paid within 365 days of the date of this Order. If any payment is not made by

the date the payment is required by this Order, the entire outstanding balance of civil penalties,

plus any additional interest accrued pursuant to 31 U.S.C. § 3717, shall be due and payable

immediately, without further application. Payment shall be: (A) made by wire transfer, United

States postal money order, certified check, bank cashier's check or bank money order; (B) made

payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the

Securities and Exchange Commission, Office of Financial Management, 100 F St., NE, Stop

6042, Washington, DC 20549; and (D) submitted under cover letter that identifies Guerra as a

Respondent in these proceedings, the file number of these proceedings, a copy of which cover

letter and money order or check shall be sent to Scott Weisman, Assistant Director, Asset

Management Unit, Division of Enforcement, Securities and Exchange Commission, 100 F St.,

NE, Washington, DC 20549.

Respondent Patino shall pay a civil money penalty in the amount of $50,000 to

the Securities and Exchange Commission. Payment shall be made in the following

installments: $25,000 shall be paid within thirty (30) days of the date of this Order and another

$25,000 shall be paid within 365 days of the date of this Order. If any payment is not made by

the date the payment is required by this Order, the entire outstanding balance of civil penalties,

plus any additional interest accrued pursuant to 31 U.S.C. § 3717, shall be due and payable

immediately, without further application. Payments shall be: (A) made by wire transfer, United

States postal money order, certified check, bank cashier’s check or bank money order; (B) made

payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the

Securities and Exchange Commission, Office of Financial Management, 100 F St., NE, Stop

6042, Washington, DC 20549; and (D) submitted under cover letter that identifies Patino as a

Respondent in these proceedings, the file number of these proceedings, a copy of which cover

letter and money order or check shall be sent to Scott Weisman, Assistant Director, Asset

Management Unit, Division of Enforcement, Securities and Exchange Commission, 100 F St.,

NE, Washington, DC 20549.

Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a

Fair Fund is created for the disgorgement, interest, and penalties ordered herein. Regardless of

whether any such Fair Fund distribution is made, amounts ordered to be paid as civil money

penalties pursuant to this Order shall be treated as penalties paid to the government for all

purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty,

Respondents agree that in any Related Investor Action, they shall not argue that they are entitled

to, nor shall they benefit by, offset or reduction of any award of compensatory damages by the

amount of any part of Respondents’ payment of civil penalties in this action (“Penalty Offset”).

If the court in any Related Investor Action grants such a Penalty Offset, Respondents agree that

they shall, within 30 days after entry of a final order granting the Penalty Offset, notify the

Commission’s counsel in this action and pay the amount of the Penalty Offset to the United

States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be

deemed an additional civil penalty and shall not be deemed to change the amount of the civil

penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor

Action” means a private damages action brought against one or more of the Respondents by or

on behalf of one or more investors based on substantially the same facts as alleged in the Order

instituted by the Commission in this proceeding.

By the Commission.

Elizabeth M. Murphy

Secretary

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.