U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23560 / June 7, 2016
Securities and Exchange Commission v. Kingdom Legacy General Partner, LLC and Mark C. Northrop, Civil Action No. 2:16-cv-00441-SPC-MRM (M.D. Fla. filed June 7, 2016)
SEC Charges Fort Myers, Florida-Based Investment Adviser and Manager in Fraudulent Fee-Siphoning Scheme
The Securities and Exchange Commission today announced fraud charges against a Fort Myers, Florida-based investment adviser and its manager who allegedly conducted an offering fraud starting in late 2010 in which they fraudulently siphoned at least $3 million in undisclosed fees charged to at least 40 investors through at least September 2015.
The SEC's complaint, filed in federal court in the Middle District of Florida, alleges that investment adviser Kingdom Legacy General Partner, LLC (KLGP) and its founder and controlling principal, Mark C. Northrop, offered investors interests in Kingdom Legacy Fund, LLC (KLF) through three share classes. According to the complaint, KLGP and Northrop represented to investors that the fees charged for the investment were an asset management fee of 2% per year and an incentive allocation fee of 20% of all profits made from trading in the three share classes. Unbeknownst to investors, KLGP and Northrop also charged additional undisclosed fees of 40% of the trading profits in one share class and 50% of the trading profits in the other two share classes. In addition to failing to disclose these excessive hidden 40% or 50% fees, KLGP and Northrop made other material misrepresentations to investors, falsely claiming that (a) Northrop had a long-standing successful investing track record, (b) Northrop's family was the largest investor in KLF, and (c) the Northrop family only made money when investors made money.
The SEC's complaint charges KLGP and Northrop with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and 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(a) thereunder, and seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil monetary penalties.
The SEC's investigation was conducted by Terence M. Tennant and Margaret Vizzi under the supervision of Elisha L. Frank in the Miami Regional Office. They were assisted by Anson Kwong, Paul Hopker, George Franceschini, Nicholas A. Monaco and John C. Mattimore of the Miami office examination program. The SEC's litigation is being led by Russell Koonin. The SEC acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) in this matter.