The president and owner of financial advisory firm Gryphon Holdings Inc., Kenneth Marsh, and four employees, Baldwin Anderson, Robert Budion, Jeanne Lada and James Levier were arrested and charged with conspiracy to commit securities and wire fraud. U.S. v. Marsh (E.D.N.Y.). The SEC filed a parallel suit which adds two defendants. SEC v. Gryphon Holdings, Inc., Case No. CV 10-1742 (E.D.N.Y. Filed April 20, 2010).

According to the court papers, since at least January 2007 the defendants defrauded investors of more than $17.5 million paid for fees and investment advisory services. In 2009, for example, the firm obtained $9.6 million from investors and $3 million more in the first two months of 2010 based on misrepresentations.

Gryphon solicited retirees and other investors through unsolicited e-mails, telephone calls and a web site which contained a number of representations including claims that:

• Its two traders ran a billion dollar hedge fund. The two traders were suppose to be graduates of Harvard, Oxford, Columbia and Wharton and former employees of Lehman Brothers and Goldman Sachs. In fact, they are fictional.

• Investors were told that the traders were managing a hedge fund with over one billion in assets. In fact, there was no fund.

• Financier George Soros supposedly praised the trading prowess of the firm. In fact, he did not.

• The firm claimed to have offices on Wall Street and in London and Sydney. In fact, its only office is in a strip mall on Staten Island.

Investors paid fees ranging from $99 to $250,000 to access the firms investment advisory services. Those who followed the advice of the firm not only lost the fees, but suffered additional losses from following its advice. The SEC obtained a temporary freeze order over the assets of the company. See also Litig. Rel. 21494 (Apr. 20, 2010).