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SEC Obtains Final Judgments Against RIA and Lead for Fraud, Inaccurate Reporting

The U.S. District Court for the Southern District of Florida entered final judgments against Lufkin Advisors LLC and its president, Chauncey Forbush Lufkin III, whom the SEC previously charged with engaging in an ongoing fraud on the private funds they manage and the investors in those funds, as well as multiple other violations. Among other things, the judgments order defendants to pay $425,000 in civil penalties.

The SEC’s complaint, filed in September 2023, alleged that defendants for years engaged in a fraudulent course of conduct that included a loss of control of crypto assets entrusted to them for at least one year without disclosure of that fact to advisory clients, multiple investments with Chauncey Lufkin’s spouse’s company without proper disclosure to private fund investors, failure to properly account for withdrawals from the private funds, failure to monitor the value of the investments made by the private funds, and a general derogation of their duty to manage the assets entrusted to them.

The complaint also alleged that defendants did not adhere to many of the statutes and rules applicable to registered investment advisers, including rules concerning the custody of assets, the accuracy of reports filed with the SEC, the maintenance of required adviser records, and the production of those records to the SEC staff.

Without admitting or denying the allegations in the SEC’s complaint, defendants consented to the entry of a final judgment permanently enjoining them from violating Sections 206(1), (2), and (4), and 207 of the Investment Advisers Act of 1940, and Rule 206(4)-8 thereunder. Lufkin Advisors also consented to permanent injunctions against violations of Advisers Act Sections 204(a) and 204A and Rules 204-2(a), 204A-1, 206(4)-2, and 206(4)-7 thereunder, and Chauncey Lufkin consented to injunctions against aiding and abetting each of those violations by Lufkin Advisors. Defendants also consented to civil penalties totaling $425,000.

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