SEC sues Calif. hedge fund manager in fraud case

WASHINGTON, Sept 26 (Reuters) - The U.S. Securities and Exchange Commission said on Wednesday it has charged a San Francisco hedge fund manager with dramatically overstating the fund's profitability and using it for personal expenses, including his ex-wife's overseas shopping allowance.

The SEC said Alexander James Trabulse sent statements to investors in his Fahey Fund that inflated the fund's returns by as much as 200 percent.

He also used the fund as his personal bank account, using the money to pay for cars and a home theater system, and giving one relative free reign over the fund's bank account for personal use, the SEC said.

An attorney for Trabulse could not immediately be reached for comment.

Trabulse founded the Fahey Fund in 1997 and raised about $10 million from about 100 investors, encouraging existing investors to serve as reference for new investors, the agency said.

"As a result, his false account statements not only lulled existing investors into believing their investments were hugely profitably, but lured new investors into the fraud," said Helane Morrison, director of the SEC's San Francisco Regional Office, in a statement.

The SEC is seeking disgorgement of ill-gotten gains, penalties and other relief from Trabulse. (Reporting by Karey Wutkowski)