SEC Charges Investment Adviser Michael E. Lewitt with Stealing $4.7 Million from Fund Investors

The Securities and Exchange Commission (SEC) has taken action against Michael E. Lewitt, a resident of Boca Raton, Florida, along with his investment advisory firm, Third Friday Management, LLC (Third Friday). The charges relate to alleged misrepresentations and omissions concerning a significant change in the investment strategy of the Third Friday Total Return Fund, L.P. (the Fund), the valuation of the Fund’s assets, and accusations of Lewitt misappropriating at least $4.7 million from the Fund for his personal gain. Michael E. Lewitt is the sole managing member and majority owner of Third Friday.

The SEC’s complaint outlines that since at least 2012, Third Friday and Lewitt had been marketing and representing to investors in the Fund’s Private Placement Memorandum that the Fund employed a “strategy of selling straddles on the S&P 500 Index over a portfolio of income-generating securities.” The complaint alleges that, without disclosing this significant change to investors, particularly many of whom were elderly, Third Friday altered its course in January 2018 by making loans to a distressed (now bankrupt) company that acquired and operated struggling rural hospitals. The Fund allegedly made 45 separate loan advances amounting to over $19 million to this company between January 2018 and November 2019. The complaint further asserts that from January 2018 through March 2020, Third Friday and Lewitt engaged in material misrepresentations and omissions, failing to disclose the change in investment strategy, the actual value of investments, Lewitt’s conflict of interest, and associated risks to investors and prospective investors. As per the allegations in the complaint, Lewitt, who had sole authority over the Fund, also misappropriated at least $4.7 million from the Fund for his personal use.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Third Friday and Lewitt with violations of the antifraud provisions of Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (Advisers Act). Additionally, the complaint charges Third Friday with violations of Sections 206(4) of the Advisers Act and Rules 206(4)-2 and 206(4)-8 thereunder, with Lewitt being accused of aiding and abetting Third Friday’s violations. The SEC’s complaint seeks permanent injunctions, disgorgement plus prejudgment interest, and civil monetary penalties against both Third Friday and Lewitt. Furthermore, it seeks a conduct-based injunction and an officer and director bar against Lewitt.

If you suspect your advisor mismanaged your money or committed negligence or fraud, call Sonn Law Group for a free consultation at 833-912-3000 today.