Securities Law Blog

Two lawsuits have been filed in Palm Beach County Circuit Court against HighTower Advisors, LLC and broker Curtis Lyman. According to court documents, two clients of Mr. Lyman filed the suits over the sale of promissory notes with Banyon 1030-32 LLC. The sale of the notes turned out to be a feeder fund for the $1.4 billion Ponzi scheme controlled by disbarred Florida attorney Scott Rothstein.

Collectively, the two investors invested and lost more than $4.6 million. The lawsuit against HighTower and Mr. Lyman alleges investment fraud, the sale of unregistered securities, breach of fiduciary duty and negligence.

The notes with Banyon went into default in November 2009 when Rothstein’s Ponzi scheme was exposed. According to court documents, Mr. Lyman’s clients were investing in Banyon notes up until October 2009.

In a June 2009 email to a client, Mr. Lyman wrote “I remain comfortable on the Banyon program. Business has remained strong and they have not ‘oversubscribed’ their demand, which is the biggest business risk I think they have. We are monitoring that closely, but, at the moment, they are working to raise over 300 million dollars in order to retire more expensive hedge funds lines. My recommendation is to renew the notes.”

The Banyon fund was controlled by George G. Levin. According to the lawsuits, Mr. Lyman told his clients that “he normally did not do ‘private deals’ as he was very leery and cautious of them” but that he had known Mr. Levin for a long time and that he personally guaranteed the notes. Mr. Lyman allegedly told investors that their investments with Mr. Levin would serve as capital for structured legal settlements, and would produce a guaranteed rate of return through the notes.

Spokeswoman for HighTower, Jennifer Connelly, indicated that the Banyon fund predated Mr. Lyman joining HighTower, and that these “legacy investments” were at no time on the HighTower platform.

HighTower CEO Elliot Weissbluth said that Mr. Lyman has his “unreserved” support.
“We are aggressively pursuing all available remedies because Curt Lyman is as much a victim as the other Ponzi scheme victims. We are defending any allegations of HighTower wrongdoing,” Weissbluth said.

According to HighTower, the significant amount of personal capital invested in the Ponzi scheme by Mr. Lyman shows that he had no intent to harm his clients.