SEC Obtains Final Judgment Against Unregistered Broker in LFS Funding Fraud
The U.S. District Court for the Central District of California entered a final judgment against Ross Gregory Erskine, one of four individual defendants charged in a 2021 U.S. Securities and Exchange Commission enforcement action involving a fraudulent securities offering by LFS Funding Limited Partnership, a Wyoming limited partnership based in the Los Angeles area.
The court permanently enjoined Erskine from violating the registration and antifraud provisions of federal securities law and from soliciting any person or entity to purchase or sell any security. The court also ordered Erskine to pay, jointly and severally with two business entities he controls, disgorgement of $60,625, prejudgment interest of $15,450.03, and a civil penalty of $100,000.
The final judgment followed a summary judgment ruling in August 2023, in which the court found that Erskine violated Sections 15(a) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 5 and 17(a) of the Securities Act of 1933.
The SEC filed its original complaint on May 20, 2021 – five years to the day before entry of the final judgment – alleging that LFS Funding raised more than $618,000 from approximately 14 investor households between May 2018 and May 2019 through a fraudulent offering of limited partnership interests. The offering purported to fund two podiatry clinics in Henderson, Nev., and Dallas, Texas.
The complaint alleged that Stephen Michael Thompson, an individual with a prior history of state securities enforcement actions, exercised undisclosed de facto control over LFS Funding while concealing his involvement behind nominee general partners. Thompson recruited Erskine and two other individuals – Steven Robert Comisar and Dale Jay Engelhardt – to solicit investors as unregistered brokers, paying commissions of 25% to 36% of investor proceeds.
According to the complaint, the offering’s private placement memorandums were materially misleading in multiple respects: they understated broker commissions paid to solicitors, failed to disclose Thompson’s control of the partnership, and omitted that Thompson was operating a skimming scheme through a purchasing agent he also controlled.
Erskine, who was the subject of a prior U.S. Commodity Futures Trading Commission enforcement action, solicited investors under the alias “John Thompson” and received commissions through two Nevada entities he controlled – Meridian Point LLC and Personal Group LLC – totaling $60,625, according to the complaint.
LFS Funding and Thompson settled the SEC’s charges at the outset of the litigation, consenting to permanent injunctions. The resolution of Erskine’s case leaves the status of proceedings against Comisar and Engelhardt unaddressed in the agency’s announcement.
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