Private Equity Firm Onyx Capital Advisors LLC Charged with Securities Fraud by SEC

The SEC has filed securities fraud charges against the private equity firm, Onyx Capital Advisors LLC, its founder Roy Dixon Jr., and his friend Michael Farr. The agency is accusing the defendants of stealing over $3 million from three area public pension funds.

According to the SEC, Onyx Capital Advisors and Dixon raised $23.8 million from the pension funds for a start-up private equity fund that was to invest in private companies. Dixon and Farr, who controlled three of the companies that the Onyx fund had invested in, then illegally took out money that the pension funds had invested and used the cash to cover their own expenses.

While Onyx Capital and Dixon allegedly took more than $2.06 million under the guise of management fees, Farr allegedly helped divert approximately $1.05 million through the companies under his control. He is also accused of diverting part of the over $15 million that Onyx capital invested in SCM Credit LLC, Second Chance Motors, and SCM Finance LLC to 1097 Sea Jay LLC, which is another company that he controls. Farr then allegedly took money from Sea Jay, gave most of it to Dixon, and kept some for himself.

The SEC is accusing Onyx Capital and Dixon of making misleading and false statements to pension fund clients about the private equity fund and the investments they were making. The agency claims that the private equity firm and its founder violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act, and Rule 206(4)-8 thereunder. The SEC claims that Farr aided and abetted in the other two defendants’ violations of Sections 206(1) and 206(2) of the Investment Advisers Act.

Related Web Resources:
SEC charges private equity firm and money manager for defrauding Detroit-area public pension funds, SEC, April 23, 2010
Read the SEC Complaint, SEC (PDF)

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