Victory Declared as SEC Withdraws Claims Against LG Capital Funding and Joseph I. Lerman
On July 14, 2025, LG Capital Funding, LLC, known for providing innovative financial solutions, announced a significant victory in its legal battle against the Securities and Exchange Commission (SEC). The SEC has officially withdrawn all claims made against LG Capital and its managing member Joseph I. Lerman, leading to a permanent dismissal of the action by the United States District Court for the Eastern District of New York. This decision marks a crucial moment for LG Capital, as it clears the company’s name after a lengthy and troubled investigation that had begun in June 2022.
The SEC's lawsuit had accused LG Capital and Lerman of requiring registration as securities dealers due to their investments in convertible notes from micro-cap companies. However, LG Capital consistently asserted that it operates strictly as a private investment firm, thereby not falling under the same regulatory requirements as securities dealers. This stance found strong support as evidence gathered during the SEC’s investigative process failed to substantiate the allegations against the firm.
The ruling concluded that LG Capital acted within the legal framework established by decades of SEC guidance that differentiates between the roles of hedge-fund investors and securities dealers. Despite the SEC's initial intentions, the facts of the case did not warrant any claims of improper dealer registration. In fact, the discovery process revealed that there was no basis for the allegations, leading to the SEC's decision to abandon its case entirely.
Joseph I. Lerman expressed his relief and satisfaction about the verdict, stating that this outcome validates LG Capital's long-standing operational model as a legitimate investment firm. 'We have always differentiated between being an investment firm and operating as a dealer subject to SEC registration,' he noted, emphasizing that this ruling allows LG Capital to refocus on its core mission of advancing innovative financing through convertible notes.
The implications of this decision extend beyond LG Capital. The SEC's withdrawal of claims and the court's ruling serve as a signal to other private investment firms regarding the potential consequences of regulatory overreach. Legal experts have commented that this case illustrates the dangers of regulatory actions based on interpretations that diverge from longstanding principles. LG Capital’s legal counsel highlighted how the ruling reinforces the necessity for clear regulatory standards rather than retroactive litigation, which can impose significant burdens on small businesses.
Moreover, this ruling aligns with a recent precedent set in another case in the Northern District of Texas, which rejected an SEC rule aimed at expanding the definition of 'dealer' to potentially encompass many fundamental market participants, potentially even the Federal Reserve. The dismissal of LG Capital's case, along with the broader legal landscape shifting in favor of private investment firms, indicates a move towards clearer guidelines embracing fair and orderly market practices.
As LG Capital moves forward, the firm remains dedicated to its objective of providing tailored financial solutions that empower small and micro-cap companies. Established in 2013, LG Capital specializes in structured debt and equity financing, focusing on enhancing innovation, workforce growth, and overall shareholder value across sectors. With this major legal hurdle behind them, LG Capital and Joseph I. Lerman can devote their energies back to fostering innovative investments that fuel business growth and stability.