U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21346 / December 22, 2009
Securities and Exchange Commission v. Triton Financial, LLC, et al., Civ. Action No. A09CA924 JN (United States District Court for the Western District of Texas, Austin Division).
SEC Sues Austin Real Estate Developer and its Principal for Conducting Fraudulent Securities Offering
On December 22, 2009, the Commission filed suit in the United States District Court for the Western District of Texas against Austin businessman Kurt B. Barton, Triton Financial, LLC ("Triton"), and Triton Acquisition, LP, d/b/a Triton Insurance, LP ("Triton Insurance"). The Commission alleges that from July 2008 through December 2009, the Defendants raised $8.4 million from approximately 90 investors in a fraudulent offering of "investor units" in Triton Insurance. The Commission further alleges that the defendants lied to investors about the use of offering proceeds and misrepresented Triton Insurance's business operations.
According to the Complaint, since at least 2004, Triton sponsored more than 40 limited partnerships and limited liability companies, raising over $50 million for these ventures. The Complaint alleges that Triton used prominent former professional football players, as well as stock brokers and other sales people, to promote its investments. Barton also actively solicited investors. The Complaint alleges that beginning in July 2008, Barton and Triton salesmen sold Triton Insurance investor units, telling prospective investors that Triton Insurance would use the money raised to purchase an insurance company. According to the Commission, the defendants did not use offering proceeds for this purpose but instead misapplied the funds to cover expenses and obligations of Triton and affiliates. Investors were not told of this misuse of their funds.
According to the Complaint, the Texas State Securities Board ("TSSB") began examining Triton after an unflattering March 2009 Sports Illustrated article about Triton's business activities. The Complaint alleges that defendants provided the TSSB with altered and fabricated documents during the examination.
The complaint alleges that the defendants violated the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint requests permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties. In addition, the Commission seeks appointment of a receiver and orders freezing defendants' assets, prohibiting the destruction of documents, and requiring defendants to provide an accounting.
Without admitting or denying the Commission's allegations, the defendants have consented to permanent injunctions against future violations of the anti-fraud provisions. They have also consented to orders appointing a receiver and freezing their assets, prohibiting the destruction of documents, and requiring that they provide an accounting.
The Commission acknowledges the assistance of the TSSB, with which the Commission has coordinated its investigation.