Craig Allen Sentenced in Atlanta Securities Fraud Lawsuit Involving The Cheetah Fund

Inside the Craig Allen Atlanta Investigation

The investigation into Craig Allen revealed a stark contrast between the performance he reported to investors and the financial reality of his fund.

Between January 2019 and January 2023, Allen solicited approximately $9.9 million from investors for The Cheetah Fund L.P.. To attract and retain capital, he sent prospective investors “tear sheets” claiming the fund had achieved annual returns as high as 73%.

However, federal prosecutors and the SEC found that these claims were lies. In reality, Allen had incurred over $4.59 million in realized trading losses during that same period.

Despite the fund losing money, Allen reportedly paid himself at least $2.64 million in performance fees—compensation that, according to the fund’s own documents, he was only entitled to if the fund generated a profit.

Criminal Sentencing and SEC Charges

The legal fallout for Craig Allen has been severe, involving both criminal sentencing and civil regulatory actions.

Federal Prison Sentence

On January 22, 2025, U.S. District Judge Thomas W. Thrash, Jr. sentenced Allen to seven years and two months in federal prison, followed by three years of supervised release.

In addition to his prison term, Allen was ordered to pay $9.2 million in restitution to the victims of his scheme.

SEC Civil Complaint

In a parallel civil action filed in April 2024, the SEC charged Allen with violating anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The SEC’s complaint seeks:

• Permanent injunctions against future violations.
• Disgorgement of ill-gotten gains with prejudgment interest.
• Civil penalties.
• A permanent officer-and-director bar.

Red Flags in the Cheetah Fund Scheme

The lawsuit against Allen emphasizes several critical red flags that often accompany hedge fund fraud. Investors who recognize these signs early may be able to protect their capital.

• Fabricated Audits: Allen falsely told investors that a specific, reputable accounting firm was auditing the fund and preparing its Schedule K-1 tax forms. In reality, the firm was not performing these services.
• Impossible Consistency: Investors received monthly account statements showing steady investment gains even as the fund was continuously losing money in the market.
• Lifestyle Spending: Authorities discovered that Allen used investor money to write checks payable to himself to fund his personal lifestyle, rather than investing the capital as promised.

The Hidden Dangers of Hedge Funds and Ponzi Schemes

The Craig Allen case illustrates the specific dangers inherent in private investment funds and how easily they can morph into Ponzi schemes. Unlike publicly traded mutual funds, hedge funds are often subject to fewer regulations and disclosure requirements, creating an environment where fraud can go undetected for years.

In a classic Ponzi structure, an operator may use capital from new investors to pay returns to earlier investors, creating an illusion of profitability. While Allen was trading—and losing—money, his scheme relied on the same fundamental deception: presenting false documents to obscure the fact that the money was gone.

Investors should be wary of the following risks common in these schemes:

• Lack of Transparency: Private funds may not provide the same level of real-time visibility into holdings as public funds, allowing managers like Allen to hide losses of over $4.59 million.
• Opague Fee Structures: Performance-based fees can incentivize managers to take excessive risks or, as alleged in the Allen case, simply take money they did not earn.
• The “Exclusive” Trap: Fraudsters often market these funds as exclusive opportunities for sophisticated investors, using the allure of high returns—such as Allen’s claimed 73%—to discourage due diligence.

How Meyer Wilson Werning Helps Victims of Securities Fraud

The Craig Allen case serves as a harsh reminder that even funds claiming “superlative” performance can be fronts for fraud. When a hedge fund manager fabricates documents and misuses client funds, the financial damage to investors can be devastating.

At Meyer Wilson Werning, we represent investors nationwide who have lost money due to Ponzi schemes, hedge fund fraud, and broker misconduct. Our team has the experience and resources to investigate complex financial schemes and pursue recovery from all responsible parties. Contact us today for a free consultation to discuss your case and learn how we can assist you in recovering your investment losses.

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