SEC alleges Gryphon Partners, hedge fund manager engaged in insider trading

By Sheri Kasprzak

New York, Dec. 12 - The Securities and Exchange Commission Tuesday said it has leveled fraud and other charges against Gryphon Partners and hedge fund manager Edwin "Bucky" Lyon, IV, alleging Gryphon and Lyon engaged in insider trading related to at least 35 PIPE offerings between 2001 and 2004.

The SEC claims Lyon implemented an illegal trading scheme that enabled Gryphon Partners - made up of Gryphon Master Fund, LP; Gryphon Partners, LP; Gryphon Partners (QP), LP; Gryphon Offshore Fund, Ltd.; Gryphon Management Partners, LP; Gryphon Management Partners III, LP; and Gryphon Advisors, LLC - to receive more than $6.5 million in proceeds by investing in PIPE deals without incurring market risk.

According to the charges filed by the SEC, Lyon and Gryphon allegedly sold short issuers' stock, mostly through "naked" short sales in Canada. Gryphon then allegedly used the PIPE shares to cover the short positions.

"To avoid detection and regulatory scrutiny, Lyon and Gryphon Partners employed a variety of deceptive trading techniques, including wash sales, matched orders and pre-arranged trades, to make it appear that they were covering their short sales with open market shares when, in fact, Lyon and Gryphon Partners were on both sides of the transactions and were covering with their PIPE shares," said the SEC's complaint filed Tuesday.

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