Donald Lester and His Private Firm Charged with Fraud

Form S-1 Financial Statement RequirementsOn October 16, 2015, the Securities and Exchange Commission (SEC) filed fraud and other charges against Donald Lester and his private equity firm, Rubicon Alliance, LLC (“Rubicon”). According to the SEC’s fraud complaint, from about January 2010 through December 2014, Lester and Rubicon accumulated over $10 million by the selling unregistered securities for two investment funds that were managed by them, CFI Fund, LLC (“CFI”) and NuPower, LLC (“NuPower”). The complaint also alleges that prior to the recent offense, Lester was involved in selling unregistered securities for a group of investment funds known as Equity Edge, which was having trouble repaying investors. Among other things, the SEC’s complaint claims that Rubicon had guaranteed Equity Edge’s performance, and that Lester conducted a fraudulent and undisclosed scheme to use $2.8 million of CFI investor funds to repay Rubicon’s obligations to the Equity Edge investors.

The SEC also claims that the CFI and NuPower offerings breached several registration provisions of the federal securities laws. According to the fraud complaint, both the CFI and NuPower offerings were unregistered and not subject to any applicable immunity, CFI and NuPower acted as investment companies without registering with the SEC, and Rubicon and Lester halted transactions in securities without registering with the SEC as a broker or associating with a registered broker.

The complaint alleges that, based on this conduct, Lester, Rubicon, and CFI violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; Rubicon and Lester violated Section 15(a) of the Exchange Act and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder; Lester, Rubicon, CFI, and NuPower violated Sections 5(a) and (c) of the Securities Act; and CFI and NuPower violated, and Lester and Rubicon aided and abetted violations of, Section 7(a) of the Investment Company Act of 1940. The SEC’s fraud complaint seeks permanent injunctions, third-tier civil penalties, disgorgement plus prejudgment interest, and other relief. Lastly, the complaint names the Equity Edge funds as relief defendants.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit  www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

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