SEC Charges Virginia-Based Investment Adviser and Its Principal for Breaches of Fiduciary Duty

ADMINISTRATIVE PROCEEDING
File No. 3-22227

October 7, 2024 - The Securities and Exchange Commission today announced settled charges against LDP Partners LLC, an unregistered investment adviser based in Hampton, Virginia, and Himalaya Rao-Potlapally, LDP Partners' sole Member and Manager, for breaching their fiduciary duties to their private venture fund client, The BFM Fund I LLC, and for misleading investors in the BFM Fund.

According to the SEC's order, LDP Partners and Rao-Potlapally breached their fiduciary duties to the BFM Fund in March 2023 by transferring $600,000 of cash out of the BFM Fund's bank account without notifying all investors in the BFM Fund, and sending it to three different non-BFM Fund bank accounts, including a personal checking account Rao-Potlapally shared with her spouse; LDP and Rao-Potlapally returned the money in August and September 2023. The SEC's order further finds that LDP Partners and Rao-Potlapally misled investors in the BFM Fund in July 2023 by providing a financial statement which represented that the $600,000 of cash was still in the BFM Fund's control, when, in fact, it was not. Finally, according to the SEC's order, LDP Partners took a total of approximately $55,000 in improper advance management fees from the BFM Fund in February 2023 and September 2023.

The SEC's order finds that LDP Partners and Rao-Potlapally willfully violated the anti-fraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the findings, LDP Partners consented to a cease-and-desist order and a censure, and Rao-Potlapally agreed to a $10,000 civil penalty, a cease-and-desist order, and a censure.

The SEC's investigation was conducted by David F. Benson and supervised by Kimberly Frederick in the Enforcement Division's Asset Management Unit in the Denver Regional Office, and also supervised by Andrew B. Dean and Corey Schuster of the Asset Management Unit. Tracy Bowen and James McDonald of the Denver Regional Office assisted with the investigation.