LIGHTHOUSE FINANCIAL PARTNERS, LLC USED BY OWNER TO MISAPPROPRIATE CLIENT FUNDS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
June 11, 2012
SEC Charges Atlanta Investment Advisor and its Owner for Misappropriating Client Funds
On Saturday, June 9, 2012, The Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of Georgia against Benjamin Daniel DeHaan and Lighthouse Financial Partners, LLC. Lighthouse, an investment advisor located in Atlanta and registered with the State of Georgia, has been owned and operated by DeHaan since 2007.

The Commission’s complaint alleges that from approximately January 2011 through early May 2012, DeHaan moved approximately $1.2 million in funds belonging to his clients from their accounts at a custodial broker-dealer into a bank account in Lighthouse’s name that he controlled, thus gaining custody and control of these client assets. DeHaan and Lighthouse told the clients that these funds would be used to open new accounts at another broker-dealer. Once in this account, at least some of these funds were moved to a personal account belong to DeHaan and to accounts used by Lighthouse for business expenses. At least $600,000 in client funds remains unaccounted for. DeHaan is also alleged to have provided false documents to the Commission’s staff and to an examiner for the State of Georgia.

Without admitting or denying the allegations in the Commission’s complaint, DeHaan and Lighthouse have offered to consent to interim relief in the form of an order providing for a preliminary injunction against violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, allowing for expedited discovery, freezing their assets, preventing the destruction or concealment of documents and requiring an accounting. The Commission may seek additional relief, such as a permanent injunction, disgorgement of any ill-gotten gains with prejudgment interest and civil penalties, at a later time.
The Commission acknowledges the assistance and cooperation of the Securities Division of the Georgia Secretary of State’s Office in investigating this matter.

SEC ALLEGES MISAPPROPRIATION OF $9 MILLION THROUGH INVESTMENT FUNDS AND MANAGEMENT COMPANIES

The following excerpt is from the SEC website:

January 18, 2012

"The Securities and Exchange Commission today announced that it has filed charges and obtained emergency relief, including an asset freeze and the appointment of a receiver, against several St. Louis, Missouri private investment funds and management companies. The SEC alleges that Burton Douglas Morriss, the principal of these entities, misappropriated over $9 million of investor assets.

The SEC alleges that Morriss told investors that his private investment funds and management companies would invest their money in a portfolio of financial services and technology companies. However, investors were unaware that for the past several years, Morriss had been misappropriating their money to the tune of millions of dollars through a series of fraudulent transfers to himself and another entity he controlled. To conceal his fraud, Morriss later disguised these fraudulent transfers as personal loans.

According to the SEC’s complaint filed in federal court in St. Louis, Missouri, at various times between approximately 2003 and 2011, Morriss, his two private investment funds, MIC VII, LLC and Acartha Technology Partners, LP, and his management firms, Gryphon Investments III, LLC and Acartha Group, LLC, raised at least $88 million from at least 97 investors to invest in preferred shares or membership interests in the defendant entities. The defendants represented to investors that the investment funds would invest in early to mid-stage companies in the financial services and technology sectors.

The SEC alleges that unbeknownst to investors, for the past several years, Morriss has misappropriated investor funds through transfers from his companies to himself and another entity he controlled, Morriss Holdings, LLC, to pay for personal expenses, including, mortgage and alimony payments, payment of personal loans, pleasure trips, and household expenses. In an attempt to conceal his scheme, the fraudulent transfers that Morriss made to himself were recorded as “loans” on the defendant entities’ books. In fact, these transfers were never truly loans because Morriss did not intend to repay them at the time of his misappropriation. Moreover, the funds transferred to Morriss for his personal use were inconsistent with the disclosures contained in the offering materials provided to investors.

The SEC’s complaint also alleges that Morriss concocted a scheme to recruit new investors to purchase membership interests in one of his private investment funds without the unanimous consent of existing investors, as required. This diluted the investments of the fund’s existing investors.

On January 17, 2012, the Honorable Carol E. Jackson granted the SEC’s request for asset freezes, the appointment of a receiver over the entity defendants, and other emergency relief to prevent further dissipation of investor assets. The SEC seeks permanent injunctive relief and financial penalties against Morriss and the entity defendants, as well as disgorgement of all ill-gotten gains from them and the relief defendant Morriss Holdings, LLC. The SEC also seeks an officer-and-director bar against Morriss. In addition, the SEC’s action names Morriss Holdings, LLC as a relief defendant.

The SEC’s complaint charges:

• Morriss with violations of Section 17(a)(1), (2), and (3) 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(a) and (c) thereunder, his aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and his violations or, in the alternative, aiding and abetting violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8(a)(2);
• Acartha Group and Gryphon III with violations of Section 17(a)(1), (2), and (3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5(a),(b), and (c) thereunder, and Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8(a)(2), thereunder; and
• MIC VII and ATP with violations of Section 17(a)(1), (2), and (3) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5(a), (b), and (c) thereunder."