U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21135 / July 15, 2009
Securities and Exchange Commission v. John W. Lawton, Paramount Partners, LP, and Crossroad Capital Management, LLC, Civil Case No. 09-cv-368 ADM/AJB, USDC, D. Minn.
COURT ENTERS ORDER OF PERMANENT INJUNCTION AGAINST DEFENDANTS IN HEDGE FUND FRAUD CASE
The Securities and Exchange Commission announced that on July 13, 2009, the United States District Court for the District of Minnesota entered a Permanent Injunctive Order ("Permanent Injunction") against Defendants John W. Lawton, Paramount Partners, LP, and Crossroad Capital Management, LLC. The Order, entered by consent, enjoins the Defendants from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.
The Commission originally filed its action against the Defendants on February 18, 2009. The Commission's complaint alleged that Paramount was a hedge fund in which approximately 50 to 60 investors, who invested as much as $9 million. The complaint alleged that Lawton and Crossroad engaged in a fraud in which they misrepresented Paramount's assets and returns to investors. For example, the complaint alleged that in January 2009, defendants sent account statements to investors that reflected investments totaling about $17 million as of December 31, 2008. The complaint alleged that, in fact, Paramount only had about $5.3 million of assets in its accounts at that time. The complaint further alleged that as of February 13, Paramount's assets amounted to less than $2 million, and the defendants withdrew $900,000 in January.
For additional information, See Litigation Release No. 20907 (February 20, 2009).