SEC FILES CHARGES ALLEGING MISAPPROPRIATION OF $16 MILLION FROM INVESTMENT FUND

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23171 / January 9, 2015

Securities and Exchange Commission v. Daniel Thibeault et al., Civil Action No. 1:15-cv-10050 (D. MA)

SEC Charges Massachusetts-Based Investment Advisers with Misappropriation of Money from an Investment Fund

The Securities and Exchange Commission announced that it has filed charges against Massachusetts-based investment advisers, their principal, and others concerning the alleged misappropriation of at least $16 million belonging to an investment fund managed by some of the defendants.

In a complaint filed today in federal court in Boston, the SEC charged as defendants:

Daniel Thibeault of Framingham, Massachusetts;
Graduate Leverage, LLC, an asset management and financial advisory firm based in Waltham, Massachusetts, of which Thibeault is the principal owner, president and Chief Executive Officer;
GL Capital Partners, LLC, an investment adviser based in Waltham, Massachusetts that is controlled by Thibeault;
GL Investment Services, LLC, an investment adviser based in Waltham, Massachusetts that is indirectly owned by Thibeault; and
Taft Financial Services, LLC, which is based in Texas and is believed to be controlled by Thibeault.

The SEC's complaint alleges that GL Capital Partners, LLC and its principal, Daniel Thibeault, were the investment advisers to a fund called the GL Beyond Income Fund, and that they misappropriated at least $16 million of the money that belonged to this fund. According to the complaint, the GL Beyond Income Fund's assets consisted primarily of individual variable rate consumer loans. According to the complaint, Thibeault and other defendants solicited investments in the GL Beyond Income Fund by representing that investors' money would be pooled and used to make or purchase consumer loans. These consumer loans would then constitute assets of the GL Beyond Income Fund, and would provide a return to the investors when interest and principal payments were made on the loans. The SEC alleges that from at least 2013 to the present, Thibeault and other defendants engaged in a scheme to create fictitious loans to divert investor money from the GL Beyond Income Fund, and to report these fake loans as assets of the GL Beyond Income Fund, thereby concealing the fact that Thibeault and the other defendants had misappropriated millions of dollars from the GL Beyond Income Fund. According to the SEC's complaint, the scheme involved the fabrication of paperwork purporting to reflect numerous six-figure consumer loans using the names and personal information of individuals who were unaware that loans were being originated in their names. The complaint further alleges that money from the GL Beyond Income Fund was disbursed to fund these fictitious loans, but the borrowed money did not go to the purported borrowers whose names appeared on the documentation. Instead, it went to Thibeault and other defendants. The SEC alleges that Thibeault and other defendants misappropriated the money from these fake loans and used it for personal expenses and to run businesses other than the GL Beyond Income Fund, as well as to perpetuate the scheme by making "interest payments" on fake loans.

The SEC alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933 and that Thibeault, GL Capital Partners, LLC, and GL Investment Services, LLC, also violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties against each of these defendants.

The SEC also charged two other parties as relief defendants based on their receipt of investor funds: GL Advisor Solutions, Inc., a corporation based in the Philippines that is controlled by Graduate Leverage, LLC and Thibeault; and Shawnet Thibeault, who is Daniel Thibeault's wife. The SEC seeks disgorgement plus prejudgment interest from these relief defendants.

In addition, the SEC has asked the court to consider certain preliminary relief against the parties, including, variously, temporary restraining orders, preliminary injunctions, asset freezes, an accounting of investor funds and all assets in their possession, a prohibition from soliciting or accepting additional investments, and other preliminary relief.

DEFENDANTS IN PENSION FUND FRAUD CASE TO PAY $9.5 MILLION JUDGEMENT

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Obtains $9.5 Million Money Judgment Against Onyx Capital Advisors, LLC, Roy Dixon, Jr. and Michael A. Farr

The Securities and Exchange Commission announced that on January 31, 2014, the Honorable Denise Page Hood of the United States District Court for the Eastern District of Michigan entered a final judgment against Defendants Onyx Capital Advisors, LLC, Roy Dixon, Jr. and Michael A. Farr. The final judgment orders the Defendants to pay over $5.4 million in disgorgement and more than $4.1 million in civil penalties.

In its Complaint, the Commission alleged that Detroit-based Onyx Capital Advisors and its founder, Dixon, raised approximately $23.8 million from three public pension funds for a start-up private equity fund and then illegally withdrew money invested by the pension funds to cover personal and other business expenses. The Complaint further alleged that Dixon's friend, Farr, assisted Dixon in the scheme. Specifically, the Commission alleged that Dixon and Onyx Capital misappropriated money from the pension funds' investments under the guise of management fees and illegally obtained additional funds by diverting money from purported investments into used car companies controlled by Farr.

The Court's final judgment, along with its order setting monetary sanctions, followed its earlier decisions to grant the Commission's motion for summary judgment against Onyx Capital Advisors and Dixon and to enter a consent judgment against Farr. The Court found that Dixon and Onyx Capital Advisors took more than $2.06 million is excess management fees and misappropriated nearly $1.05 million through Farr and his companies. The Court also found that Farr illegally received approximately $2.3 million that Onyx Capital Advisors ostensibly invested in his companies.

The Court imposed the following relief against Dixon and Onyx Capital Advisors: 1) permanent injunctions prohibiting future violations of Section 17(a) of the Securities Exchange Act of 1933, 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 thereunder; 2) an order requiring them to jointly disgorge more than $3.1 million plus prejudgment interest; and 3) an order requiring them to jointly pay a civil penalty of more than $3.1 million. The Court further ordered Farr to disgorge more than $2.3 million plus prejudgment interest and to pay a civil penalty of $1 million. The Court previously had entered a permanent injunction, by consent, against Farr prohibiting him from aiding and abetting future violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.