SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18226 / July 10, 2003
FEDERAL COURT ISSUES EMERGENCY ORDER FREEZING ASSETS OF PURPORTED BILLION DOLLAR HEDGE FUND GROUP; SEC ALLEGES MASSIVE OVERVALUATION AND MANIPULATION SCHEME
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL LAUER, LANCER MANAGEMENT GROUP, LLC, and LANCER MANAGEMENT GROUP II, LLC, Defendants, and LANCER OFFSHORE, INC., LANCER PARTNERS, LP, OMNIFUND, LTD., LSPV, INC., and LSPV, LLC, Relief Defendants, Case No. 03-80612-CIV-ZLOCH (S.D. Fla., filed July 8, 2003).
The United States Securities and Exchange Commission (SEC) announced today that a federal judge in South Florida has entered a temporary restraining order against the Connecticut-based advisers of a purported billion-dollar hedge fund to restrain them from violating the antifraud provisions of the federal securities laws. The Honorable William J. Zloch, Chief Judge, United States District Court for the Southern District of Florida, also ordered the defendants' assets frozen until at least July 18th, when he has scheduled a hearing. The orders came in response to the SEC's emergency civil injunctive action (Complaint) that sought a temporary restraining order, an order freezing assets, disgorgement and civil penalties and other relief against against advisers Lancer Management Group, LLC (Lancer) and Lancer Management Group II, LLC (Lancer II) and their principal, Michael Lauer, based on their alleged violations of the federal securities laws. In addition the Complaint named as relief defendants Lancer Offshore, Inc. (Offshore), Lancer Partners, LP (Partners), OmniFund, Ltd. (OmniFund), LSPV, Inc. and LSPV, LLC. The court appointed a Receiver to marshall and safeguard the entities' assets.
The SEC's court papers allege that from at least March 2000 to the present, Lauer, Lancer and Lancer II, engaged in a scheme to over-inflate the performances and net asset values of Offshore, Partners and OmniFund, three hedge funds controlled by Lauer (collectively the Funds) which recently claimed to have assets worth over $1 billion dollars. Specifically, the Complaint alleges that the defendants systematically manipulated the month end closing prices of certain securities held by the Funds to overstate the value of the Funds' holdings in virtually worthless companies. The SEC's Complaint states that the defendants then provided unfounded and unrealistic valuation opinions to auditors to obtain audited financial statements for Offshore. The Complaint also alleges that the defendants made numerous materially false and misleading statements and omissions in the Funds' offering and marketing materials. Finally, the Complaint alleges that the fraudulent manipulative trading practices and pumped-up valuations employed by Lauer, Lancer and Lancer II were designed to attract new investors to invest in the Funds and to induce current investors to forgo redemptions and to continue investing in the Funds which resulted in increased management fees paid to the defendants.
Upon the SEC's motion, the Court appointed Marty Steinberg, Esq., an attorney in the law firm of Hunton & Williams LLP, as Receiver over Lancer, Lancer II, Offshore, OmniFund, LSPV, Inc. and LSPV, LLC. Among other things, Mr. Steinberg is responsible for taking control of Lancer, Lancer II, Offshore, OmniFund, LSPV, Inc. and LSPV, LLC and for marshaling and safeguarding their assets.
The Complaint charges Lauer, Lancer and Lancer II with violations of Sections 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act"). The Complaint also alleges that Lauer acted as the "control person" for Lancer and Lancer II under Section 20(a) of the Exchange Act for their violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC is also seeking, among other things, permanent injunctions, disgorgement of ill-gotten profits, civil money penalties and an accounting.