Manhattan Investment Fund Manager Convicted Of Securities Fraud, Wire Fraud, And Investment Adviser Fraud Charges | USAO-SDNY

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that DONALD LAGUARDIA was convicted yesterday following a five-day jury trial before the Honorable Lewis A. Kaplan.  As the jury found, between 2013 and 2016, LAGUARDIA, the chief executive officer and co-founder of a New York-based investment firm, L-R Managers, LLC, lied to investors and misappropriated money from investment funds managed by LAGUARDIA through L-R Managers.  The jury convicted LAGUARDIA of three counts: securities fraud, investment adviser fraud, and wire fraud.

Acting U.S. Attorney Audrey Strauss said:  “As a jury unanimously determined, Donald LaGuardia lied to investors about how their invested money would be utilized, failing to disclose that much of it would be spent on business and personal expenses.  Further, LaGuardia continued to lie in soliciting additional investors even after he was well aware his company was in financial distress.  Now he awaits sentencing for his crimes.”

According to the Indictment, evidence presented during the trial, court documents, and statements in open court:

From in or about 2013 through in or about 2017, LAGUARDIA solicited millions of dollars from investors for the LR Global Frontier Master Fund and two related feeder funds (collectively, the “Frontier Funds”), which had a stated focus on investments in “frontier” markets in Latin America, Central and Eastern Europe, the Middle East, Africa, and Asia.  Contrary to LAGUARDIA’s representations, and in breach of his duties to investors in the Frontier Funds, LAGUARDIA misappropriated more than $1.2 million in investors’ money to finance L-R Managers’ payroll, rent for its office space on Park Avenue in Manhattan, and hundreds of thousands of dollars in charges on the firm’s credit card, among other unauthorized expenses.  At least $191,000 of the misappropriated money went directly to, or for the benefit of, LAGUARDIA personally.

In one example, in 2013, LAGUARDIA solicited an $800,000 investment in the Frontier Funds from an investor (“Investor-1”).  Upon receipt of Investor-1’s money, an L-R Managers employee sent an email to LAGUARDIA and another person asking for approval to forward the $800,000 to the Frontier Funds.  LAGUARDIA responded, “Dont [sic] wire anything yet!”  LAGUARDIA then caused approximately $390,000 of Investor-1’s investment never to be transmitted to the Frontier Funds, but instead to be used to pay himself approximately $52,000 and for various other personal and business expenses.

By September 2015, L-R Managers faced substantial financial difficulties.  On September 1, 2015, an L-R Managers principal sent an email to LAGUARDIA and others at the firm stating that it would be “ethically troubling to accept money into the [Frontier Funds] when [L-R Managers] can no longer support . . . payroll and mission critical services.”  Nevertheless, just a few days later, a new investor solicited by LAGUARDIA (“Investor-2”) made a $2 million investment into the Frontier Funds.  Prior to this investment, LAGUARDIA concealed his firm’s near insolvency from Investor-2 and did not disclose that the Frontier Funds had been paying substantial expenses for L-R Managers, contrary to the representations in the funds’ offering documents.  LAGUARDIA then proceeded, over the course of several months, to use a substantial portion of Investor-2’s investment in the Frontier Funds to continue paying himself and subsidizing his firm’s business expenses.

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LAGUARDIA, 53, of Lavallette, New Jersey, was convicted at trial of one count of securities fraud, one count of wire fraud, and one count of investment adviser fraud.  LAGUARDIA faces a maximum sentence of 20 years in prison on each of the securities and wire fraud counts and a maximum sentence of five years in prison on the investment adviser fraud count.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence imposed upon LAGUARDIA will be determined by the judge.

Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service.  Ms. Strauss also thanked the Securities and Exchange Commission, which previously brought a related civil action against LAGUARDIA.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Max Nicholas, Elisha Kobre, Margaret Graham, and Daniel Loss are in charge of the prosecution.

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