Manhattan Fund Manager Charged With Misappropriating Clients’ Money

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment charging DONALD LAGUARDIA with securities fraud, wire fraud, and investment adviser fraud in connection with his operation of a now-bankrupt New York-based investment firm, L-R Managers, LLC.  Over several years, LAGUARDIA, the chief executive officer and co-founder of L-R Managers, misappropriated more than $1.5 million from private investment funds managed by the firm and used the stolen money to finance his personal and business expenses.  LAGUARDIA was arrested this morning in Lavallette, New Jersey.  The case is assigned to U.S. District Judge Lewis A. Kaplan.  LAGUARDIA will be presented before Judge Kaplan in Manhattan federal court later today.

U.S. Geoffrey S. Berman said:  “As alleged, Donald Laguardia stole from investors through a series of lies.  He violated his clients’ trust by siphoning their money to bankroll his business and line his own pockets.  Now, Laguardia faces prosecution for his alleged crimes.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “Mr. Laguardia showed a reckless disregard for his clients when he allegedly misappropriated their investment money to fund personal and business expenses.  This is a clear case of greed overshadowing honest business practices.”

According to the allegations contained in the Indictment,[1] unsealed today in Manhattan federal 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 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, 52, of Lavallette, New Jersey, is charged with 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 sentencing of a defendant will be determined by the judge.

Mr. Berman praised the investigative work of the USPIS.  Mr. Berman also thanked the Securities & 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 Margaret Graham and Daniel Loss are in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.