SEC Sues LG Capital Funding and Its Managing Member, Joseph Lerman, for Acting as Unregistered Securities Dealers

On June 7, 2022, the Securities and Exchange Commission (the “SEC”) announced charges against LG Capital Funding, LLC (“LG Capital”) and its managing member Joseph Lerman of Brooklyn, New York, for failing to register as securities dealers with the SEC.

LG Capital and Lerman allegedly bought and sold billions of newly-issued shares of microcap securities, or “penny stocks,” which generated millions of dollars for LG Capital and Lerman.

The SEC’s complaint, filed in the Eastern District of New York, alleges that between at least January 2016 and December 2021 (the “Relevant Period”), LG Capital engaged in the business of purchasing convertible notes from penny stock issuers, converting the notes into shares of stock at a large discount from the market price, and selling those newly issued shares into the market at a significant profit.

During the Relevant Period, LG Capital allegedly purchased over 330 convertible notes from more than 100 separate issuers (many of whom were repeat customers).  LG Capital then proceeded to convert at least 150 of the 330 convertible Notes into more than 23 billion unrestricted, newly issued shares of common stock – shares that had never traded publicly until LG Capital introduced them into the public markets, generating sales proceeds of approximately $30 million and net profits of approximately $20 million.

As alleged, neither LG Capital nor Lerman were registered as a dealer with the SEC or associated with a registered dealer, in violation of the mandatory registration provisions of the federal securities laws.

By failing to register, LG Capital and Lerman avoided certain regulatory obligations for dealers that govern their conduct in the marketplace, including regulatory inspections and oversight, financial responsibility requirements, and maintaining books and records.

Upon information and belief, LG Capital continues to hold unconverted notes and shares derived from converted notes and is still engaged in the convertible note business today.

The SEC’s complaint charges LG Capital and Lerman with violating the registration provision of Section 15(a)(1) of the Securities Exchange Act of 1934 and charges Lerman with violating Section 20(a) of the Securities Exchange Act of 1934. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, a civil penalty, a penny stock bar, and other equitable relief.

The complaint also names as relief defendants LG Capital’s two other members, Daniel Gellman and Boruch Greenberg, and LG Capital’s primary employee, Eli Safdieh, who all allegedly received illicit proceeds from LG Capital and Lerman’s violations.

The SEC action against LG Capital follows a string of similar actions against other “toxic lenders” as unregistered broker-dealers. 

On January 21, 2022, the SEC won a summary judgment against Justin W. Keener d/b/a JMJ Financial.

Prior to the summary judgment against Keener, the  SEC won a summary judgment against Ibrahim Almagarby and his company, Microcap Equity Group, LLC, on August 17, 2020.


To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].  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 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.

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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