In a litigated case, the SEC charged Solomon Lichtenstein, founder of Taraxa Capital Fund, LP, and Lightstone Trading Inc., with orchestrating a fraudulent scheme that raised approximately $2.7 million from over 25 investors, many of whom were Lichtenstein’s family members, neighbors, and friends. Lichtenstein solicited investors in Taxara, a purported hedge fund through which he would day-trade securities. Taraxa fund interests were offered pursuant to a private placement memorandum ("PPM") and limited partnership agreement ("LPA") with Lichtenstein compensated through typical management fees and a performance allocation depending on the magnitude of investor returns. Alternatively, investors were given the option of purchasing notes issued by Lighthouse, and investors were to receive a fixed interest payment of 5% per month, which was intended to be generated from trading returns. Lichtenstein represented that investor capital would be used for strategic day trading, that he would never leave money in the market overnight, and that investments would be limited to a certain percentage of the fund’s assets to minimize the risk of loss. However, the SEC complaint noted that rather than investing all of the money he raised from Taraxa and Lightstone investors as promised, Lichtenstein misappropriated investor funds to pay for personal expenses, as well as to make Ponzi-like payments to satisfy redemption requests and interest obligations owed to other investors. While the SEC alleged that Lichtenstein's trades on behalf of Taraxa and Lightstone investors resulted in net losses of approximately $200,000, he failed to disclose the losses to investors and instead fabricated positive returns, reporting a significant growth in the value of investments. When the scheme ultimately collapsed, Lichtenstein had lost more than $1.5 million of investor funds. He eventually admitted to investors that he inflated earnings after accounts were depleted and committed to convening an oversight board with two sophisticated investors in order to ensure future transparency and propriety; however, he never gave board members access to brokerage accounts. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Lichtenstein.