SEC v. Troy Lyndon and Ronald Zaucha, Case No. CV13 00486 SOM KSC (D. Haw.). On September 25, 2013, the SEC announced fraud charges against Troy Lyndon, the founder, CEO and CFO of a religious-themed video game manufacturer and his friend Ronald Zaucha with fraud for falsely inflating the company’s revenue. According to the SEC, Lyndon caused Left Behind Games Inc. to issue almost two billion shares of stock to Zaucha as supposed payment for consulting services. In reality, the plan was for Zaucha
to sell unregistered stock into the market and give a portion of the proceeds to Left Behind Games to make its revenue look better than it actually was. Moreover, Zaucha barely performed any consulting work. The SEC alleges that the company was unprofitable and in desperate need of money. So Lyndon issued the stock to Zaucha who sold it for about $4.6 million. He then gave the company around $3.3 million to the company in ways designed to hide the true nature of the transaction. Zaucha paid the company some money for what was coined as “early-sell fees” for the sale of stock. In addition, Zaucha formed a company called Lighthouse Distributors and then used the money from his stock sales to buy more than $1 million in unusable inventory from Left Behind Games. Lighthouse then gave the products away to churches and religious organizations. Nevertheless, the company recognized the revenue from these fake transactions and claimed that its revenue had increased nearly 1,300 percent from the prior fiscal year. Zaucha later gave another
$1 million to Left Behind Games as instructed by Lyndon. The SEC also alleges that Zaucha kept more than $1 million from the stock sales for personal use including the purchase of condominiums in Maui and Orange County.
The SEC charged Lyndon and Zaucha with violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5. The SEC also charged Lyndon with violating Section 13(b)(5) of the Exchange Act, and Rules 13a-14, 13b2-1, and 13b2-2, and aiding and abetting Left Behind Games’ violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13. The SEC seeks injunctive relief, civil monetary penalties, and penny stock bars against Lyndon and Zaucha, and an officer-and-director bar against Lyndon.