The Securities and Exchange Commission (SEC) has charged hedge fund SBB Research with perpetrating a years-long fraud that has bled investors of millions of dollars. SBB Research, born nearly ten years ago in Samuel Barnett’s CalTech college dorm room, had grown to $400 million dollar hedge fund by misleading investors that it was doing better than it really was.

Jesse Westbrook filed this report published in Bloomberg:

The SEC on Monday sued Barnett, SBB and Matthew Aven, the firm’s chief operating officer. Barnett started Northbrook, Illinois-based SBB in 2010, initially investing his family fortune, the regulator said in an order. But even after raising hundreds of millions of dollars from friends and relatives, the California Institute of Technology graduate had greater ambitions: turning SBB into an SEC registered firm that could solicit money from outside investors.

To get there, Barnett promoted his investing acumen in appearances on CNBC and other media outlets. He also sought to establish a track record to show prospective clients he was an expert trader. But according to the SEC, SBB’s track record was based on fraudulent manipulation by Barnett and Aven of the value of the hedge fund firm’s investments.

“Investors rely on investment advisers to accurately value assets and disclose fund performance,” Daniel Michael, who runs the SEC enforcement division’s complex financial instruments unit, said in a statement. “As alleged in the SEC’s complaint, SBB, Barnett, and Aven intentionally manipulated valuation models to deceive current and prospective investors.”

Barnett, who primarily invested in structured notes, overcharged his clients $1.4 million in fees due to the inflated evaluations, according to the SEC. He eventually tried to make investors whole by paying a “secret” credit into their accounts without revealing that they had been overcharged in the first place, the regulator said.

SBB is “eager” to fight the SEC’s allegations in court, H. Gregory Baker, a lawyer representing Barnett, SBB and Aven, said in a statement.