A Bermuda-based hedge fund is at the centre of a complex legal case involving two American investment companies accused by the United States' Securities and Exchange Commission (SEC) of collecting $30 million from investors under fraudulent circumstances, the bulk of which vanished after being transferred to an investment firm in Malta, according to a Maltese newspaper.

Some $24 million of the funds are believed to be in Bermuda held in a non-operative fund and the investors' chances of recuperating their minimum investments are thought to be minimal, said the Malta Independent on Sunday.

According to court documents obtained by the paper, the bulk of the $30 million collected from some 150 unwary investors from across the US and Canada seems to have disappeared after it was moved to the Valletta-based company Exodus Equities Inc.

The American investment firms, Coadum Advisors Inc. and Mansell Capital Partners III, had instructed that the majority of the $30 million be put into bank accounts held by Exodus Equities at the Bank of Valletta and Credit Suisse, despite their investors being promised their funds were being held in safekeeping in an escrow account in the US.

And, according to the SEC's complaint, Exodus Equities then transferred the multi-million dollar portfolio to a non-functioning Bermuda hedge fund operated by Exodus in Bermuda under Bermudian law.

No one from the company was available for comment on Friday, according to the paper, as none of the phone numbers listed for Exodus Equities or any of its partner companies in Malta were answered or responded on Friday afternoon.

In its case, the SEC notes investors' funds collected between 2006 and 2007 "appear" to have been invested in the Exodus Platinum Genesis Fund Ltd., "a Bermuda hedge fund which has yet to begin operation, and in 'pre-REIT convertible bonds' which have yet to provide any return".

But despite the fact that no returns were being made on their investments, investors were repeatedly told they were making four per cent per month and that all or most of their principal was held in escrow.

The SEC's complaint also alleges the American firms, without disclosing to investors, "borrowed" in excess of $3 million of, or against, the investors' funds, while additionally distributing approximately $5 million to related parties.

The two American companies are, according to the SEC, controlled by James Jeffrey from Ontario, Canada and Thomas Repke from Salt Lake City, Utah.

Between 2006 and 2007, Coadum and Mansell fraudulently told investors they stood to make monthly returns of up to eight per cent on what they claimed was a risk-free investment, claimed the SEC.

The US courts have no jurisdiction over the Maltese and Bermudian operations of Exodus, but the American firms and their controllers are being charged with soliciting more than $30 million from investors, falsely representing projected returns, misrepresenting that the funds were protected and never left an escrow account, and failing to disclose that the defendants have made loans to themselves from investor proceeds.

The SEC alleges the funds invested with the defendants were not handled as promised and that "the defendants have misrepresented to investors that their principal is protected and never leaves the escrow account, or is secured by collateral".

According to the SEC complaint, to bank statements filed as court exhibits, $24 million was deposited between July 2006 and October 2007 in an escrow account, but that by late November 2007, only about $818,000 remained in the account.

Appearing in court earlier this month, lawyer Melanie Mayer, who was tasked with managing the escrow account, declared she had overseen the wire transfer of a "substantial majority" of the funds to accounts at Bank of Valetta and to accounts at Credit Suisse in Geneva held by Exodus Equities.

The SEC charged that Ms. Mayer had not been acting as an escrow agent, but rather was operating as a "pass through". Ms Mayer, who herself is not facing charges at the moment, was paid $130,000 as an escrow fee, which was pointed out as being above market value for such services, as escrow agents are usually paid between $10,000 and $15,000 for similar services on a multi-million dollar account as the one in question.

According to the US law firm named as receivers in the SEC complaint, it is too early to tell whether investors will get their money back, but that it is "highly unlikely that investors will receive their entire principal investment".

The case's next hearing is scheduled for next month.