Founder Of Private Equity Firm Pleads Guilty

United States Attorney for the Southern District of New York, Jay Clayton, announced today that JAY LUCAS, the founder and managing partner of Lucas Brand Equity LLC ("LBE"), a private equity fund based in Manhattan, pled guilty to securities fraud, investment adviser fraud, wire fraud, and money laundering in connection with a scheme to raise over $50 million from investors by falsely representing that their money would be invested in early-stage health and wellness companies. Instead, LUCAS diverted much of that money to cover personal expenses, promote unrelated ventures, and make Ponzi-like payments to earlier investors. LUCAS pled guilty today before U.S. Magistrate Judge Robyn F. Tarnofsky.

"Lucas lied to investors to induce them into investing millions of dollars in private equity funds that he created, promising to invest their money in emerging companies in the health and wellness space," said U.S. Attorney Jay Clayton. "In reality, Lucas used much of the money to pay for personal expenses and ventures entirely unrelated to the funds, and to make Ponzi-like payments to other investors. Today's plea reflects the continued commitment of this Office and our law enforcement partners to holding accountable investment advisers who abuse their investors' trust to illegally enrich themselves."

As alleged in the Indictment:

LUCAS is the founder and managing partner of LBE and three private funds: Lucas Brand Equity LP ("Fund One"), L.B. Equity Emerging Growth LP ("Fund Two"), and L.B. Equity Wellness Growth L.P. ("Fund Three"). Since 2017, LUCAS has defrauded investors by, among other things, systematically misappropriating their funds.

LUCAS told investors that LBE's "core strategy is to invest in these small to mid-size emerging brands, provide value added services to differentiate them and catalyze growth to a sufficient scale for exit." LUCAS raised over $50 million from investors and, instead of using the money as he promised, spent much of it on personal expenses, including alimony, rent, a vanity newspaper project in his hometown, and political consultants. He also used new investor money to pay earlier investors in Ponzi-like fashion, enriching himself while starving the Funds and portfolio companies of capital. In addition, LUCAS funneled investor money to Immunocologie, a luxury skincare business run by LUCAS's wife, without disclosing that conflict of interest. Much of the money for Immunocologie was then spent on trips, social events, and other unprofitable ventures. Moreover, LUCAS arranged for LBE, not the Funds, to take majority ownership interest in Immunocologie, giving himself and not his clients an equity interest in the business.

LUCAS's misconduct left the Funds chronically undercapitalized and unable to cover basic fund expenses, including salaries for LBE employees. Internally, employees continued to express frustration about LUCAS's misuse of investor money, writing that LUCAS's spending was "not spending on LBE," was "literally fraudulent," and was "a huge betrayal of investor trust and most likely illegal."

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LUCAS, 71, of Portsmouth, New Hampshire, pled guilty to one count of securities fraud, one count of wire fraud, and one count of money laundering, each of which carries a maximum prison term of 20 years, and one count of investment adviser fraud, which carries a maximum prison term of five years.

The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Clayton praised the outstanding work of the Federal Bureau of Investigation. Mr. Clayton also thanked the U.S. Securities and Exchange Commission for its assistance and cooperation in the investigation.

This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Adam S. Hobson and David J. Robles are in charge of the prosecution.