Gryphon Caught in PIPE Trading Scheme

Dec 13 2006 | 10:43am ET

The Securities and Exchange Commission on Dec. 12 filed securities fraud and related charges against Edwin “Bucky” Lyon and hedge fund Gryphon Partners in Manhattan federal court. Gryphon allegedly carried out an illegal trading scheme to evade the registration requirements of the federal securities laws in connection with at least 35 public investments in private equity, or PIPE, transactions, made materially false representations to PIPE issuers and engaged in insider trading.

From 2001 through 2004, Lyon is accused of operating an unlawful trading scheme that enabled Gryphon to realize more than $6.5 million in gains by investing in PIPE offerings without incurring market risk. Specifically, the complaint alleges that Lyon and Gryphon, after agreeing to invest in a PIPE transaction, shorted the issuer’s stock, frequently through “naked” short sales in Canada. Once the SEC declared the resale registration statement effective, Lyon and Gryphon used the PIPE shares to cover the short positions, which is prohibited.
 
To avoid detection and regulatory scrutiny, Lyon and Gryphon allegedly employed a variety of deceptive trading techniques, including wash sales, matched orders and pre-arranged trades, to make it look like they were covering their short sales with open market shares. In fact, Lyon and Gryphon were on both sides of the fence and were covering with their PIPE shares.
 
The SEC is seeking to permanently enjoin Gryphon from future violations of the federal securities laws, disgorgement of ill-gotten gains and civil penalties.


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of