The head of a Bermuda-based investment fund has been charged with fraud in a complaint lodged by the US Securities and Exchange Commission (SEC).

Dr Hans Black, who controls Interinvest, which has a Bermuda arm, is accused of funnelling millions of dollars into four financially-troubled Canadian penny stock firms in which he had undisclosed business and financial interests.

The SEC alleges that clients of the Massachusetts-based investment advisory company may have lost as much as $12 million of the $17 million investment based on the recent trading history of shares in the penny stock companies.

Some of the penny stock firms involved were said to be in the business of exploration for gold and other valuable minerals.

Black served on the board of directors of these firms, which collectively paid an entity he controls around $1.7 million.

A statement by the SEC said: “Black’s involvement with these companies and his receipt of payments from them created a conflict of interest that and Interinvest failed to disclose to their advisory clients.”

The SEC said the alleged violations were discovered after the watchdog launched an examination of the firm’s books.

The SEC’s complaint — filed on Tuesday in a Boston federal court — also alleges that Black and Interinvest “stonewalled” their investigation.

Now the SEC is seeking a court order to freeze Interinvest’s assets and prohibit the firm and Black from continuing to exercise investment authority over client assets, said by Interinvest to total nearly $95 million.

SEC Boston office director Paul Levenson said: “Investment advisers have a duty to put their clients’ interests first and fully disclose all conflicts of interest.

“We allege that Interinvest and Black violated that duty by investing client money in companies where he has a stake without fully disclosing that conflict to clients.”

The SEC’s complaint alleges that that Interinvest broke anti-fraud and related provisions of US federal securities laws.

In addition to the freezing of assets, the SEC complaint also asks the court to “permanently enjoin Interinvest and Black from violating the securities laws and require them to repay allegedly ill-gotten gains with interest and penalties”.

A Bermuda court in 2009 ordered Interinvest, then based in Montreal, and its Hedge Hog and Conserve Fund, to repay investor Regula Dobie, a Swiss national living in Kenya, a minimum of $5 million, plus interest and damages.

The court heard that Ms Dobie had transferred $4 million to Interinvest’s Bank of Butterfield account in 2004 and a further $2 million in 2005, to be invested in the Hedge Hog and Conserve Fund.

Ms Dobie in 2007 tried to redeem her investment, but with no success.

A criminal complaint was also made by Ms Dobie to the Bermuda Police, who recommended that Black be prosecuted for alleged fraud.