SEC Halts Misappropriation and Fraudulent Securities Offering
Litigation Release No. 24458 / April 23, 2019
Securities and Exchange Commission v. Eric D. Lyons, et al., Civil Action No. 1:19-cv-10785-NMG (D. Mass., filed April 22, 2019)
The Securities and Exchange Commission yesterday obtained an emergency asset freeze and temporary restraining order to halt an ongoing fraudulent securities offering by Eric D. Lyons, a Massachusetts resident, in an attempt to conceal his misappropriation from certain hedge funds Lyons advised through his Massachusetts-based investment advisory businesses.
According to the SEC's complaint, from mid-2017 to the present, Lyons and various investment adviser entities with the name Synchrony that Lyons controlled engaged in a scheme to misappropriate assets from hedge funds Lyons and these Synchrony adviser entities managed. The SEC alleges that Lyons transferred hundreds of thousands of dollars from the Synchrony hedge funds to Lyons' personal bank accounts to pay for personal expenses, including frequent vacation travel, entertainment, rent, automobile lease payments, and other personal expenses. Further, the SEC alleges that Lyons replaced some of the misappropriated money by engaging in a securities offering fraud, in which he obtained approximately $300,000 from an investor based on false and misleading statements about other potential large investors and a fabricated $100 million business valuation. In total, the SEC's complaint alleges that Lyons and the Synchrony adviser entities raised approximately $700,000 from their misappropriation and securities offering fraud schemes.
The SEC's complaint, filed in U.S. District Court for the District of Massachusetts, charges Lyons, Synchrony Capital GP, LLC, Synchrony Capital Group, and Synchrony Group, LLC with violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. The Court yesterday entered an order granting a temporary restraining order, asset freeze, and other emergency and ancillary relief.
The complaint seeks injunctive relief, disgorgement of ill-gotten monetary gains, plus interest and penalties. The SEC's complaint also names as relief defendant Synchrony Global Macro, LP, which holds investor assets.
The SEC's case is being handled by Rory Alex, Robert Baker, Susan Curtin, William Donahue, and Richard Harper of the SEC's Boston Regional Office.