A private-equity fund manager was sued by New York’s attorney general for allegedly defrauding investors and secretly funneling millions of dollars to a small broker-dealer he controlled.

Laurence G. Allen, the chief executive officer of Nyppex Holdings LLC in Rye Brook, New York, misappropriated more than $13 million to enrich himself and his companies from 2008 to 2018, according to the securities-fraud lawsuit filed Wednesday in Manhattan.

Allen used “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 Thursday in a statement. “There is no safe haven for white collar fraudsters in New York.”

The suit alleges violations of the state’s Martin Act, which provides broad authority to investigate corporate behavior that impacts investors.

Allen, 62, founded his 15-person private-equity company in 1998. He denied the allegations in a phone interview on Thursday and said he’ll put up a vigorous defense.

“We believe this is a total overreach by the NYAG in its latest application of the Martin Act, and would create significant risk to the private equity fund industry if successful,” Allen said.

The claims stem from a fund called ACP X LP, which Allen started in 2004 to invest in discounted private-equity interests on the secondary market, according to the complaint. The investments included interests sourced through Allen’s broker-dealer that were purported to give clients “prompt and consistent distributions from the fund,” the suit claims.

Diverting Funds

But when Nyppex ran into financial problems in 2008, New York claims, Allen abused his “unchecked control” over ACP by diverting its funds to Nyppex in the form of investments.

“Allen used the money ACP invested to both pay his own Nyppex salary and stop NYPPEX from going under,” according to the complaint.

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