Federal Judge Rejects Key Claim in SEC ''PIPEs'' Enforcement Case Against Edwin Buchanan Lyon, IV., and Gryphon Family of ''Hedge'' Funds - Dismisse
DALLAS, Jan. 3 /PRNewswire/ -- Gryphon Partners, a Dallas based "hedge" fund, today announced that on January 2, 2008, the Honorable Sidney H. Stein, United States District Judge for the Southern District of New York, dismissed all of the SEC''s claims under Section 5 of the Securities Act of 1933 against Edwin Buchanan ("Bucky") Lyon, IV., and the Gryphon Family of funds, in a case of major significance.
The SEC had maintained that Lyon and Gryphon violated Section 5 in the manner in which they traded certain Private Investments in Public Equities ("PIPE") offerings. In particular, the SEC alleged that Gryphon violated Section 5 when it took a short position in the PIPE issuer''s publicly traded shares prior to the resale registration statement and then "covered" its short position with PIPE shares after the effective date of the resale registration statement. The motion to dismiss before Judge Stein centered on whether the delivery of once-restricted PIPE shares to close a short position converted the underlying short sale into a sale of PIPE shares, constituting an unregistered distribution and violating Section 5.
Judge Stein ruled that the SEC''s characterization of these practices, which formed the foundation for its entire case against Mr. Lyon, was "implausible" and could not be supported by either the plain meaning of Section 5 or the statute''s underlying purpose. Judge Stein further found that the SEC based its claim on agency materials that provided "negligible support" for its view of short sales and that it quoted "selectively" and "misleadingly" from one of them to support its case.
Mr. Lyon stated that "we are very gratified that Judge Stein has rejected what was the centerpiece of the SEC''s case against Gryphon and myself. We look forward to prevailing on the few remaining issues in the case and believe that we will be entirely vindicated in this manner."
Counsel for Gryphon and Mr. Lyon, Christopher J. Clark of Dewey and LeBoeuf, noted that, "Judge Stein''s well reasoned and careful opinion obviously undermines the SEC''s entire theory of a Section 5 violation both in this case, and the many, many other enforcement actions that the SEC has brought and is considering bringing against hedge funds. This is an important decision for Gryphon, for Bucky Lyon, and for the hedge fund community as a whole."
Contact: Christopher J. Clark (212) 424-8555
Source: Gryphon Partners |
