SEC v. Yusaf Jawed, Grifphon Asset Management, LLC, et al; Case No. 12-1696 (D. Ore.); SEC v. Jacques Nichols, Case No. 12-1698 (D. Ore.); SEC v. Lyman Bruhn, et al., Case No. 12-1697 (D. Ore.). On September 21, 2012, the SEC announced a trio of cases related to a $37 million Ponzi scheme run by hedge fund manager Yusaf Jawed. Jawed and his management companies Grifphon Asset Management LLC and Grifphon Holdings LLC managed several hedge funds. Their marketing materials claimed that the Grifphon funds earned significant returns. Jawed also claimed that investor funds would be invested in publicly-traded securities and the assets were kept at reputable financial institutions. In reality, Jawed hardly invested any of the $37 million he raised. Most of the money raised was paid to investors in other funds or moved to accounts belonging to Grifphon Asset Management or other entities that Jawed controlled. Jawed hid his fraud by telling Grifphon’s bookkeepers that the money transfers were for bond purchases. The SEC also charged Robert P. Custis, an attorney who Jawed hired to assist him in the fraud. Custis sent false statements to investors about the funds’ assets.
The SEC charged Jawed and his management companies with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC charged Custis with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aiding and abetting violations of Section 206(4) and Rule 206(4)-8 thereunder. The SEC seeks injunctive relief, disgorgement and prejudgment interest, and civil monetary penalties.
The SEC filed two other complaints. Attorney Jacques Nichols lied to investors by claiming that an independent third party would pay tens of millions of dollars to buy the hedge funds’ alleged assets at a premium. Jawed’s associate, Lyman Bruhn, ran a separate Ponzi scheme and induced investments through false claims he was investing in “blue chip” stocks.
Without admitting or denying the allegations, Nichols, Bruhn, and two entities Bruhn controlled (Pearl Asset Management, LLC and Sasquatch Capital Management, LLC) settled with the SEC. Among other things, Bruhn consented to the entry of permanent injunctions against violations of the Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. Nichols consented to the entry of a permanent injunction against violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder.