Lufkin Advisors, LLC; Chauncey Forbush Lufkin III

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25839 / September 20, 2023

Securities and Exchange Commission v. Lufkin Advisors, LLC and Chauncey Forbush Lufkin III, No. 23-civ-81289 (S.D. Fla. filed Sept. 19, 2023)

SEC Charges Florida Investment Adviser and Its President with Fraud and Failing to Produce Records to SEC Examinations Staff

On September 19, 2023, the Securities and Exchange Commission filed charges against Lufkin Advisors, LLC, a Florida-based registered investment adviser and its President, Chief Compliance Officer, and majority owner Chauncey Forbush Lufkin III, alleging an ongoing fraud on the private funds they manage and the investors in those funds, as well as multiple other violations, including failing to produce books and records to the SEC's Division of Examinations when requested.

According to the SEC's complaint, filed in the United States District Court for the Southern District of Florida, Lufkin Advisors and Chauncey Lufkin have for years engaged in a fraudulent course of conduct that included a loss of control of crypto assets entrusted to them for at least one year without disclosure of that fact to advisory clients, multiple investments with Mr. Lufkin's spouse's company without proper disclosure to private fund investors, failure to properly account for withdrawals from the private funds, failure to monitor the value of the investments made by the private funds, and a general derogation of their duty to manage the assets entrusted to them. The complaint also alleges that defendants did not adhere to many of the statutes and rules applicable to registered investment advisers, including rules concerning the custody of assets, the accuracy of reports filed with the SEC, and the maintenance of required adviser records.

The SEC's complaint charges defendants with violating the antifraud provisions of Section 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"), as well as violations of Section 206(4) and Rule 206(4)-8 thereunder, which prohibit fraud against investors in pooled investment vehicles. Defendants are also charged with making material misrepresentations in Lufkin Advisors' Forms ADV in violation of Advisers Act Section 207. Lufkin Advisors is further charged with violating Advisers Act Section 206(4) and Rule 206(4)-2 (failure to comply with asset custody requirements); Rule 206(4)-7 (failure to create, implement, and review adviser policies and procedures); Section 204A and Rule 204A-1 (failure to adopt an adviser code of ethics); Section 204(a) and Rule 204-2(a) (failure to keep required books and records); and Section 204(a) (failure to produce books and records). Chauncey Lufkin is charged with aiding and abetting each of those violations by Lufkin Advisors. The Commission has also sought certain preliminary relief to safeguard client and investor assets.

The SEC's case is being handled by Alexandra Lavin, Andrew Walsh, Marc Jones, and Michele T. Perillo of the Boston Regional Office. The examination that led to this investigation was handled by Jonathon Arleo, Nitish Bahadur, Jason Lake, and Melissa Clough of the Boston Regional Office.

• SEC Complaint