Attorney General Richard Blumenthal and Banking Commissioner Howard F. Pitkin announced a lawsuit against an unregistered investment adviser whose firm allegedly charged more than $26 million in fees after lying to investors and overvaluing assets that it managed on behalf of various funds.

The lawsuit names Southridge Capital Management LLC (SCM) and its chief executive officer, Stephen Hicks, for violating Connecticut’s securities law.

The Ridgefield firm acted as the general partner to five funds, providing investment advice and strategy to the funds.

It allegedly overvalued the assets of the funds -- through false financial statements -- in order to illegally charge greater fees to investors in Connecticut and elsewhere, earning more than $26 million.

“This investment firm told lucrative lies -- allegedly charged more than $26 million in fees by fraudulently overvaluing assets,” Blumenthal said. “This kind of financial fraud harms investors, but also the entire economy. We will fight for restitution, civil penalties and an order blocking this firm from imposing future harm.”

Pitkin said, “This suit illustrates the Department’s dedication to ferret out those activities by companies and individuals whom, for ill-gotten gains, defraud investors as in this case by overvaluing fund assets.”

The Banking Department subpoenaed SCM in 2007 to investigate its management activities with respect to five funds that it advises and manages -- Sovereign Partners LP, Southridge Partners, LP, Dominion Capital Fund LTD, Dominion Investment Fund LTD, and Southshore Capital Fund LTD.

SCM also allegedly continued to charge withdrawn partners management and administrative fees, and Hicks allegedly misled at least one client about the purpose and nature of an investment.

The lawsuit seeks significant civil penalties, restitution, an order that SCM and Hicks redeem all redemption requests received by investors that they have long disregarded. The legal action also seeks an order prohibiting Hicks from engaging in any investment-related activities for 10 years.

Blumenthal thanks the hard work of those in the Banking Department who conducted the investigation -- specifically members of the agency’s securities division.