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Justice News

Department of Justice
U.S. Attorney’s Office
Eastern District of Michigan

FOR IMMEDIATE RELEASE
Wednesday, October 12, 2022

Detroit Equity Fund Owner Charged with Defrauding Investors of Over $27 million

DETROIT – An equity fund CEO was charged with bilking investors of over $27 million by fraudulently exaggerating his fund’s investment performance and by embezzling from the fund, United States Attorney Dawn N. Ison announced today.

Ison was joined in the announcement by James A. Tarasca, Special Agent in Charge of the Detroit Field Division of the Federal Bureau of Investigation.

Andrew H. Middlebrooks, age 30, of Dallas, Texas, the former majority owner, chief executive officer, chief investment officer, and portfolio manager of EIA All Weather Alpha Fund 1 Partners (EIA) is charged in a Criminal Information with one count of wire fraud. During a significant part of the scheme, Middlebrooks resided in the Detroit metropolitan area.  The information charges that from May 2017 through May 2022, Middlebrooks solicited clients for EIA by telling them he was able to exploit “inefficiencies” in global equity markets which would result in large returns for investors.  From the beginning of the scheme to defraud, however, EIA’s fund failed to produce the predicted returns and suffered catastrophic losses.

Instead of informing EIA’s existing investors that the fund was failing, Middlebrooks solicited new investors with false statements about the fund’s performance and lulled existing investors by lying to them about the returns their investments generated. Middlebrooks also created and distributed false documents claiming that EIA’s performance was exceptional. In one document, created in the fall of 2019, Middlebrooks falsely claimed that EIA’s track record included a cumulative return of 476.81% with 81.82% of monthly trading showing a profit.

Middlebrooks also lied to investors about how their money would be used. During the scheme, Middlebrooks routinely took money from the fund for living expenses and transferred money from the fund to his wife’s business. By the Spring of 2022, Middlebrook’s scheme to defraud began unraveling, and EIA’s fund collapsed. Losses to at least 100 investors exceeded $27 million.

“Middlebrooks used an apparently legitimate company, sophisticated methods, and a complex web of lies to deceive his victims, but his crime amounts to nothing more than theft and unbridled greed. Middlebrooks’s ability to convince the victim-investors that his false promises were true allowed him to steal their money,” said United States Attorney Dawn N. Ison.  “Today’s charge demonstrates our commitment to ensure the integrity of our financial systems.” 

“Mr. Middlebrook allegedly lied to and stole money from investors and potential investors by providing false financial statements and inflating the fund's returns,” said James A. Tarasca, Special Agent in Charge of the FBI’s Detroit Division. “This case is an example of the FBI’s commitment to work with our partners to investigate those engaged in financial fraud and to protect the financial well-being of honest, hard-working Americans.”

Middlebrooks faces the following statutory maximum penalties: 20 years in prison, a $250,000 fine, and up to 3 years supervised release. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The investigation of this case was conducted by the Federal Bureau of Investigation. Both the United States Attorney’s Office and the Federal Bureau of Investigation wish to acknowledge and thank the Securities and Exchange Commission for its assistance.

Topic(s): 
Financial Fraud
Updated October 12, 2022