The Securities and Futures Commission has recovered HK$191m ($24.6m) of assets from the Cayman-domiciled Athena Fund, which was a product from asset manager Descartes Athena Fund SPC.
"The SFC alleges the Athena Fund was an outright fraud," said Mark Steward, the SFC's executive director of enforcement.
"Our action to have the assets frozen prevented them from disappearing into the perpetrators' pockets and will enable most investors to recover a substantial portion of their investments."
In 2009, the SFC moved to freeze assets of the Athena Fund, a hedge fund. Regulators alleged that the fund managers "defrauded investors by issuing false documents purportedly from a major accounting firm and sending them false statements of account and subscription contracts and that the assets of the Athena Fund had been dissipated".
The SFC determined that the assets - the securities - from the Athena Fund had been transferred to NBS Ltd.
"NBS claimed to be a nominee of Bestmega Ltd, an investor in the Athena Fund. NBS and Bestmega contended they were entitled to retain these securities because Bestmega was an investor in the Athena Fund," the regulator said in a statement.
The SFC countered that the securities had been "illegally transferred by the Athena Fund to Bestmega and that both NBS and Bestmega were liable to restore the Athena Fund to the original position before the alleged illegal transfer".
The SFC reached an agreement with NBS and Bestmega without any finding of illegality or admission by NBS/Bestmega.
Under the agreement, the HK$191m will be paid to the Athena Fund, which was liquidated in the Cayman Isalands, for distribution by the court-appointed liquidators to all investors in the Athena Fund and the Descartes Group, including Bestmega/NBS.
The whereabouts of the fund managers of are unknown, the SFC added.