Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, August 12, 2009

SEC Settles PIPE Offerings Insider Trading Case

On August 7, 2009, the United States District Court for the Southern District of New York entered a final judgment against Edwin "Bucky" Lyon, IV, Gryphon Master Fund, L.P., Gryphon Partners, L.P., Gryphon Partners (QP), L.P., Gryphon Offshore Fund, Ltd., Gryphon Management Partners, L.P., Gryphon Management Partners III, L.P., and Gryphon Advisors, L.L.C. (collectively, "Gryphon Partners") in SEC v. Edwin B. Lyon, IV, et al., 06 Civ. 14338 (S.D.N.Y.), an insider trading case the Commission filed on December 12, 2006. The Commission's complaint against Lyon and Gryphon Partners alleged that they violated the antifraud provisions of the federal securities laws in connection with four PIPE (an acronym for private investment in public equity) offerings.  Specifically, the complaint alleged that, in connection with four separate PIPE offerings, Lyon and Gryphon Partners, after being solicited to invest, engaged in illegal insider trading by selling short the PIPE issuers' securities prior to the public announcement. Lyon and Gryphon Partners engaged in this conduct notwithstanding their agreement to keep information about the PIPE confidential.

Without admitting or denying the allegations in the complaint, Lyon and each Gryphon Partners entity consented to the entry of a final judgment permanently enjoining them from future violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 (specifically, Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5). The final judgment also orders Lyon and Gryphon Advisors, L.L.C. to pay, jointly and severally, disgorgement of $66,712, plus prejudgment interest of $33,850, and a civil penalty of $310,288, and further orders Gryphon Master Fund, L.P., Gryphon Partners, L.P., Gryphon Partners (QP), L.P., Gryphon Offshore Fund, Ltd., Gryphon Management Partners, L.P., and Gryphon Management Partners III, L.P. to pay, jointly and severally, disgorgement in the amount of $243,576, plus prejudgment interest of $123,590.

http://lawprofessors.typepad.com/securities/2009/08/sec-settles-pipe-offerings-insider-trading-case.html

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