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Operator of Investment Fund Faces Conspiracy and Securities Fraud Charges

Posted on Jun 17, 2011

A New York federal grand jury has recently indicted 55-year-old Lloyd Barriger on conspiracy and securities fraud charges. Mr. Barriger operated investment fund Gaffken & Barriger Fund LLC, which is based in New York. The fund collapsed in 2008 and Mr. Barriger is being accused of actions which allegedly took place between April 2005 and September 2008.

Prosecutors allege that Gaffken & Barriger Fund LLC claimed that the fund contained real estate assets, such as commercial mortgage loans with collateral. In 2006, Mr. Barriger allegedly took out a $15 million line of credit to raise capital for fund operations, and in July 2006 began a scheme to defraud in which he solicited $12.6 million from 70 investors.

Prosecutors further claim that Mr. Barriger failed to tell investors when the delinquencies on the fund's loan portfolio rose first to 25% in June 2007, and later to 34% in November 2007. Those delinquencies allegedly led to financial trouble for the fund, as it was unable to fund the promised 8% return to investors. During that time, Mr. Barriger is accused of making false claims to current and prospective investors regarding the solvency and liquidity of the fund.

The U.S. Securities and Exchange Commission has also filed a civil lawsuit against Mr. Barriger alleging that Mr. Barriger misused the fund's assets by providing cash distributions to investors who requested them.

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