SEC Unseals Emergency Case Against High Street Crypto Fund Operators

The U.S. Securities and Exchange Commission disclosed on June 19, 2020 that it had obtained a temporary restraining order and asset freeze against Sean and Shane Hvizdzak and three companies they controlled. The emergency action targeted a private fund promoted as an algorithmic vehicle for cryptocurrency investments.

The complaint was filed under seal on June 16, 2020 in the U.S. District Court for the Western District of Pennsylvania. Its unsealing on June 19 made public the SEC’s allegations against Hvizdzak Capital Management, High Street Capital, High Street Capital Partners and the two brothers. The court had also ordered an accounting, expedited discovery and preservation of documents.

The allegations had not been adjudicated. The defendants had not yet presented a response in the public record described by the SEC, and the regulator said its investigation remained open.

Returns alleged to be fabricated

High Street Capital Fund USA was formed on March 26, 2019 and described in offering materials as a pooled, algorithmic investment fund seeking above-average returns from cryptocurrency volatility. The SEC said limited-partnership interests in that fund were securities.

According to the complaint, a March 13, 2020 presentation claimed that the fund gained 100.77% in the third quarter of 2019 and 92.90% in the fourth quarter. The SEC instead alleged that the fund lost 17.2% during the third quarter and recorded a total 2019 loss of 24.2%.

The complaint also described purported audited statements claiming more than $157 million of assets as of December 31, 2019, including $107 million held at Gemini. The regulator alleged that the fund actually had approximately $2.2 million in cash and cash equivalents on that date, with only $0.53 in its Gemini account. An investment adviser identified only by role reportedly contacted the named accounting firm, which said it had provided tax services but had not performed the represented audit. Three clients who had considered investing a combined $2 million ultimately did not proceed, according to the filing.

Investor money crossed personal and crypto accounts

The SEC’s bank-record allegations were broader than a dispute over reported performance. From July 1, 2019 through the period examined in the complaint, an Hvizdzak Capital Management bank account received approximately $31 million from third parties. Nearly $26 million—more than 80% of the account’s inflows—was allegedly transferred to the brothers’ personal accounts.

The complaint said bank records directly identified at least $3 million associated with two investors as misappropriated and suggested that additional investor funds were involved. It also alleged that approximately $18.75 million arrived between July 1, 2019 and May 22, 2020 through transfers whose instructions referred to investments, the fund or investment accounts.

Some money then entered digital-asset infrastructure. The SEC alleged that nearly $18 million moved from the brothers’ personal bank accounts to their personal Gemini accounts beginning in July 2019. It further alleged that, between July 1, 2019 and June 14, 2020, Shane Hvizdzak transferred more than $20 million in value from a personal Gemini account to destinations on multiple blockchains, including more than $5 million sent from April 1 through June 14 to unattributed, non-custodial locations.

Those figures were the SEC’s tracing conclusions, not independently verified on-chain calculations published with transaction identifiers.

Why the action mattered

The case illustrated that cryptocurrency-fund enforcement could depend on conventional records and blockchain movements together. The alleged misconduct began with offering documents, bank wires and a purported audit; digital-asset accounts then complicated the task of locating and preserving funds.

As of June 19, 2020, the emergency orders preserved the status quo rather than resolving liability. A hearing was scheduled for June 30 to consider a preliminary injunction and continuation of the freeze. Any eventual judgment, recovery or criminal proceeding remained outside what could have been known from the event-day record.