The manager of a private equity fund was accused by the New York Attorney General's Office on Thursday of transferring money from investors to a company he owned to pay his own salary and keep that business from folding.

Laurence Allen, the CEO of NYPPEX Holdings LLC, was the target of a lawsuit from the Attorney General's Office in Manhattan Supreme Court on Thursday over the alleged fraud.

Allen was sued by the Attorney General's Office under the state's Martin Act, a section of law that affords the office sweeping authority to handle matters of securities fraud. The lawsuit also brought common-law claims and claims under the state's executive law.

The New York Attorney General's Office said its investigation into Allen's dealings dates back more than two years.

"This lawsuit highlights the greed and hubris a single individual presented by allegedly using other people's savings as his personal piggy bank and as a tool to prop up his failing businesses," New York Attorney General Letitia James said.

According to the lawsuit, Allen is accused of transferring money from a fund that he managed, called ACP, to NYPPEX to pad his own salary. Between 2008 and 2018, Allen transferred about $5.7 million from ACP to NYPPEX—the same amount he was paid during that time.

That money, according to the New York Attorney General's Office, was initially paid into ACP by investors. The fund was launched to purchase interests in other private funds at a discount.

But the transfers from ACP into NYPPEX were meritless, the lawsuit said. Investors had no prospect of ever earning a return because NYPPEX has continued to lose money over the past decade, the Attorney General's Office said.

Allen is also alleged to have misappropriated $3.4 million in carried interest from ACP and using the fund's money to pay for the daily expenses of NYPPEX. Those actions violated ACP's offering documents, the suit said.

He was also accused of defrauding investors by saying the investments from ACP into NYPPEX had been vetted by a committee that didn't exist. He also took steps to inflate the value of the fund for investors, the lawsuit said.

Leon Borstein, a shareholder at Borstein Turkel in Manhattan who's representing Allen, said he was confident that his client would be successful against the litigation.

"From my view so far in the facts, I don't think they're right in any aspect of their complaint," Borstein said.

He pointed to the evidence against Allen, in terms of fraud, and said the Attorney General's Office had come up short. After reviewing each exhibit accompanying the lawsuit, he said none showed a complaint of fraud from an investor.

"There's no exhibit that they have in their papers that is a complaint by an investor that he or she has been defrauded—not one," Borstein said. "In order to be a fraud, somebody has to say they've been defrauded."

Borstein also argued that the Attorney General's Office may not have standing to bring the litigation because, he claimed, many of the fund's investors were not New York residents.

As part of the state's lawsuit, the Attorney General's Office is seeking restitution, damages and other penalties from Allen. It's also seeking a special receiver to take control of ACP's assets and dissolve the fund without control from Allen.

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