A U.S. fund manager allegedly raised money from investors for a day-trading venture that was actually a Ponzi scheme, U.S. authorities are alleging.
The U.S. Securities and Exchange Commission charged Solomon Lichtenstein — the founder of hedge fund, Taraxa Capital Fund LP, and Lightstone Trading Inc. — for allegedly defrauding investors in a scheme that raised approximately US$2.7 million, ostensibly for securities trading.
According to the regulator’s complaint, starting in late 2022, Lichtenstein raised US$2.4 million from investors — many of whom were family and friends — for the Taraxa fund; and, sold another US$300,000 worth of promissory notes issued by Lightstone, which promised to pay 5% monthly returns generated by trading profits.
However, U.S. authorities allege that Lichtenstein actually misappropriated almost US$1 million to pay personal expenses, and paid out US$1.1 million to certain investors in Ponzi-like payments — leaving investors with US$1.5 million in losses.
The SEC alleged that Lichtenstein violated securities rules; and, in a parallel criminal case brought by the U.S. attorney for the Southern District of New York (SDNY), he was also charged with securities fraud and wire fraud.
The allegations have not been proven.