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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23894 / August 1, 2017

Securities and Exchange Commission v. Donald J. Lester, et al., No. 15-cv-02301 (D. Colo. filed Oct. 16, 2015)

SEC Obtains Final Judgment Against A Colorado Investment Firm and its Manager

The Securities and Exchange Commission announced that it has obtained final judgments against Donald J. Lester, his self-described private equity firm Rubicon Alliance, LLC, and other investment funds managed by them.

In October 2015, the SEC charged Lester, Rubicon and the funds, CFI Fund, LLC and NuPower, LLC, with violations of the antifraud and registration provisions of the federal securities laws in connection with Lester, through his management of Rubicon, negligently causing CFI to purchase assets from another entity managed by Rubicon without conducting a proper valuation, and Lester and Rubicon failing to disclose potential conflicts of interest as to the transaction and contradicting certain representations in the CFI offering memorandum. The SEC also charged Equity Edge Preferred Income Fund I, LLC, Equity Edge, LLC, and Equity Edge Companies, LLC as relief defendants based on their receipt of CFI investor proceeds. The SEC also alleged that Lester and Rubicon sold securities without registering with the SEC as a broker or associating with a registered broker. The SEC encourages investors to check the backgrounds of people selling them investments by using the SEC's investor.gov website to quickly identify whether they are registered professionals.

The final judgments, entered on July 26, 2017 by the Honorable Christine M. Arguello of the U.S. District Court for the District of Colorado, permanently enjoin:

  • Lester, Rubicon, CFI and NuPower from violating Sections 5(a) and (c) of the Securities Act of 1933;
     
  • Lester, Rubicon and CFI from violating Section 17(a)(2) of the Securities Act of 1933;
     
  • Lester and Rubicon from violating Sections 206(2) and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder, Section 17(a)(3) of the Securities Act of 1933, and Section 15(a) of the Securities Exchange Act of 1934; and
     
  • CFI and NuPower from violating Section 7(a) of the Investment Company Act of 1940.

The defendants consented to the entry of the judgments without admitting or denying the SEC's allegations. In connection with the judgments, Rubicon, CFI, NuPower, and the Equity Edge relief defendants consented to enter into a receivership. The judgments also order Lester to pay a $25,000 civil penalty and deem Rubicon's and the relief defendant's disgorgement obligations satisfied by their entry into receiverships. Lester separately consented to the entry of an SEC order that imposes associational and penny stock bars, with a right to re-apply in five years. In connection with the settlements, the Commission dismissed its claims that Lester, Rubicon, and CFI violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Lester and Rubicon violated Section 206(1) of the Advisers Act, Section 17(a)(1) of the Exchange Act, and aided and abetted violations of Section 7(a) of the Investment Company Act.

The SEC's investigation was conducted by Michael J. Cates and Kerry M. Matticks, and supervised by Ian S. Karpel, and the litigation was handled by Mark L. Williams and Danielle R. Voorhees, and was supervised by Gregory A. Kasper.

 

https://www.sec.gov/litigation/litreleases/2017/lr23894.htm


Modified: 08/01/2017