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SEC v. Donald S. LaGuardia, Jr., et al.

Aug. 22, 2023

Case No. 19-cv-05895 (S.D.N.Y.)

  • SEC v. Donald S. LaGuardia, Jr., et al.
    Case No. 19-cv-05895 (S.D.N.Y.)
  • In the Matter of Northern Trust Hedge Fund Services LLC, et al.
    Admin. Proc. File No. 3-20030

On June 24, 2019, the Commission filed a complaint against Donald S. LaGuardia, Jr. (“LaGuardia” or the “Defendant”). On July 21, 2021, the Commission filed an amended complaint (“Amended Complaint”), and named LR Global Frontier Master Fund Ltd., LR Global Frontier Fund Ltd. (Offshore), and LR Global Frontier Fund Ltd. (Onshore) as relief defendants (collectively, the “Funds” or “Relief Defendants”). The Amended Complaint alleges that, beginning in at least 2013 and continuing to May 2017, LaGuardia, who controlled the unregistered investment adviser L-R Managers, LLC (“L-R Managers”), perpetrated a three-pronged scheme to defraud the Funds, which were managed by L-R Managers, and the Funds’ investors. Between 2013 and 2015, LaGuardia raised at least $6 million from fewer than a dozen investors for investments in the Relief Defendants. LaGuardia misappropriated approximately $2.62 million from the Relief Defendants and then concealed part of this misappropriation by directing that the misappropriated funds be recorded as a promissory note and receivable “due from” L-R Managers to the Relief Defendants. See the Commission’s Amended Complaint.

On July 5, 2022, the Court ordered the liquidation of assets held in custody for the Relief Defendants (the “Custodial Assets”) and their transfer to the Court’s registry account (the “CRIS Account”). The Court also appointed Lain, Faulkner and Co., P.C. as the Distribution Agent to formulate and implement a distribution plan in consultation with the Commission staff; as well as the Tax Administrator for the funds under the jurisdiction of the Court. See the Court’s Order.

On November 14, 2022, in the related administrative proceeding, In the Matter Northern Trust Hedge Fund Services LLC, et al., the Commission approved a Plan of Distribution providing for the transfer of a Fair Fund established in that proceeding, less fees incurred, to the CRIS Account for distribution to harmed investors pursuant to a plan to be approved by the Court. See the Commission’s Order: Release No. 34-96310 and the Plan.

Pursuant to the Commission’s Order, in December 2022, $169,711.55 was added to the CRIS Account.

On September 8, 2023, the Commission filed a Motion for an Order to Show Cause, seeking an Order to Show Cause why the Court should not approve the Commission’s proposed plan of distribution (the “Proposed Plan”). See the Commission’s Motion and the Proposed Plan.

On September 12, 2023, the Court granted the Commission’s motion and entered an Order to Show Cause. Individuals and entities who were clients of LR Managers LLC and had an interest in the Custodial Fund as of September 30, 2016, and/or investors who held investments in the Relief Defendants during the period January 1, 2016 through August 31, 2017, inclusive, for losses caused by Donald S. LaGuardia, Jr.’s misappropriation of funds from the Relief Defendants, or other interested parties, have until October 22, 2023 to show cause, if there is any, why the Court should not enter an Order approving the Proposed Plan. See the Court’s Order.

On October 26, 2023, the Commission filed a Notice of No Objection with the Court and requested that the Court enter an Order approving the proposed distribution plan. See the Commission’s Notice.

By Order entered on December 7, 2023, the Court approved the SEC’s proposed distribution plan. See Court Order with attached plan.

For more information, please contact the Distribution Agent:
LainFaulkner
Email: LR-Global@lainfaulkner.com
Phone: 214-777-0276

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