In a cautionary tale about the career-limiting risks of SEC sanctions, a private fund adviser and its owner were found to have misused over $1 million of fund assets, resulting in a bar from the investment industry as well as a civil penalty.

Monsoon Capital, LLC (Monsoon) is an SEC-registered investment adviser founded and owned by Gautam Prakash. Among Monsoon’s clients is Monsoon Infrastructure & Realty Co-Invest, L.P. (MIRC), a private fund focused on infrastructure investments in India.

According to the settlement order, between 2015 and 2019, Prakash routinely purchased two airline tickets for the same trip, but for different prices and on different airlines. He then obtained a refund for the more expensive ticket, used the cheaper one, but submitted the more expensive one for reimbursement to be paid in part as a MIRC fund expense. Prakash retained the difference in cost, and he collected $44,042 in excess travel costs for himself. In 2019, Prakash returned the improper expenses with interest, and disclosed them in the fund’s 2018 financial statements.

Additionally, the SEC alleged that Prakash borrowed $1 million in 2017 from a MIRC fund account to settle a personal trade of his in India. He had initially attempted to transfer funds to his personal account in India, but an error caused the money to not be available in time to fund the transaction. Prakesh then temporarily borrowed $1 million from MIRC’s account to settle the trade, in spite of alleged warnings from Monsoon employees that this would constitute a breach of fiduciary duty. Prakash returned the $1 million with interest, and disclosed the loan in MIRC’s 2018 financial statements.

The SEC found that Monsoon and Prakash willfully violated Advisers Act provisions that prohibit defrauding clients, engaging in fraud, and making false statements to investors. As a result, the SEC barred Prakash from the investment industry and required Monsoon and Prakash to pay a $100,000 civil penalty.

This case should serve as a cautionary tale. It’s unlikely that Prakash will be able to work as an investment advisor or associate with another regulated entity in the future – all for seemingly little gain on his part. The SEC imposed an unqualified industry bar, with no right to reapply, so Prakash likely would need to show “extraordinary circumstances” if he is ever to return to the industry.

See In re Matthew D. Sample, 2015 WL 5305992, SEC Release No. 4193 (Sept. 10, 2015).

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Photo of Julia M. Ansanelli Julia M. Ansanelli

Julia Ansanelli is an associate in the Litigation Department and a member of the firm’s White Collar Defense & Investigations, Securities Litigation, and Asset Management Litigation Practice Groups.  She has worked extensively defending clients facing criminal and regulatory investigations by the Securities and…

Julia Ansanelli is an associate in the Litigation Department and a member of the firm’s White Collar Defense & Investigations, Securities Litigation, and Asset Management Litigation Practice Groups.  She has worked extensively defending clients facing criminal and regulatory investigations by the Securities and Exchange Commission, the U.S. Department of Justice, and the Federal Trade Commission.  She is also a member of the litigation team that represents the Financial Oversight and Management Board in the Commonwealth of Puerto Rico’s bankruptcy proceedings.  Julia has experience with various stages of complex commercial litigation, both in federal and state courts.

Julia maintains an active pro bono practice, with an emphasis on immigration law, and in particular, special immigrant juvenile status.  In recognition of her pro bono efforts, Julia received a Proskauer Golden Gavel award in 2018 in connection with an amicus brief she helped prepare in support of a class of thousands of immigrant youth that had been denied special immigrant juvenile status in New York based on a then-new USCIS policy.  The class of immigrant youth were ultimately successful when the Southern District of New York judge agreed that the USCIS policy violated federal immigration law.

During law school, she served as Case Note Editor of the Touro Law Review, in which she published two case notes of her own, and Vice President of Touro’s Latin American Law School Association. Julia also interned for the Honorable Magistrate Kathleen Tomlinson in the Eastern District of New York.

Julia is a frequent contributor to Proskauer’s Minding Your Business and Capital Commitment blogs.  She has also been recognized as a Super Lawyers “Rising Star” from 2020-2023.

Photo of Joshua M. Newville Joshua M. Newville

Joshua M. Newville is a partner in the Litigation Department and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and…

Joshua M. Newville is a partner in the Litigation Department and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and criminal investigations. In addition, Josh advises registered investment advisers and private fund managers on regulatory compliance, SEC exams, MNPI/insider trading and related risks.

Before joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset Management Unit, a specialized unit focusing on investment advisers and the asset management industry. His prior experience with the SEC provides a unique perspective to help asset managers manage risk and handle regulatory issues.