New York investment fund founder pleads guilty to $50 million investor fraud scheme

Jay Lucas, the founder and managing partner of Manhattan-based Lucas Brand Equity LLC and three private investment funds, pleaded guilty Wednesday to securities fraud, investment adviser fraud, wire fraud and money laundering, U.S. Attorney for the Southern District of New York Jay Clayton announced. Lucas entered his plea before U.S. Magistrate Judge Robyn F. Tarnofsky in connection with a scheme that raised more than $50 million from investors through false representations.

According to Clayton’s office, Lucas told investors that the three funds he managed — Lucas Brand Equity LP, L.B. Equity Emerging Growth LP and L.B. Equity Wellness Growth L.P. — would invest in early-stage health and wellness companies. Instead, prosecutors said, Lucas diverted much of the money to cover personal expenses and promote unrelated ventures and used money from new investors to pay earlier investors in Ponzi-like fashion.

“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,” Clayton said in a statement. “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.”

According to the indictment, Lucas had defrauded investors since 2017 by systematically misappropriating their money. He spent investor funds on personal expenses including alimony, rent, a vanity newspaper project in his hometown and political consultants, prosecutors alleged.

Lucas also funneled investor money to Immunocologie, a luxury skincare business run by his wife, without disclosing the conflict of interest, according to the indictment. Much of the money provided to Immunocologie was then spent on trips, social events and other unprofitable ventures, prosecutors alleged. Lucas also arranged for his firm, rather than the investment funds, to obtain a majority ownership interest in Immunocologie, giving him instead of his clients an equity interest in the business.

Lucas’s conduct left the funds chronically undercapitalized and unable to cover basic expenses, including employee salaries, according to the indictment. Employees internally criticized his use of investor money, describing the spending as “not spending on LBE,” “literally fraudulent” and “a huge betrayal of investor trust and most likely illegal.”

Lucas, 71, of Portsmouth, New Hampshire, pleaded guilty to one count each of securities fraud, wire fraud and money laundering, each carrying a maximum prison sentence of 20 years. He also pleaded guilty to one count of investment adviser fraud, which carries a maximum prison sentence of five years. Any sentence will be determined by a judge.

Clayton credited the FBI for its work on the case and thanked the U.S. Securities and Exchange Commission for its assistance and cooperation. The prosecution is being handled by the office’s Securities and Commodities Fraud Task Force, with Assistant U.S. Attorneys Adam S. Hobson and David J. Robles leading the case.