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SEC investment fraud case ensnares N.Y. lawyer, law firm

Kitco News

(Reuters) - A New York lawyer allowed his law firm's bank account to be used in an investment scam that bilked investors out of $8.4 million, the U.S. Securities and Exchange Commission said Thursday.

Kenneth Miller and his small law firm, Frost & Miller, allegedly helped Dallas-based Aaron McKnight scam investors by allowing McKnight to funnel more than $2 million of the investors' money through the firm's bank accounts, the SEC said in a civil lawsuit filed against both men in Dallas federal court.

The SEC said McKnight conducted a series of schemes, including one in which he offered a trading program that would pool investors' funds to make multimillion dollar investments, promising returns of 40% to 100% per month for 10 to 12 months.

But the trading program did not exist, the SEC said. Instead, McKnight allegedly took the money and used part of it for a down payment on a house and to fund a jazz club he partially owned, the SEC said.

McKnight and Miller could not immediately be reached for comment.

Miller and his firm did not work on the transactions or investigate them, according to the lawsuit. Miller "blindly followed" McKnight's instructions, the SEC said.

Miller, 72, represents companies in corporate, finance, M&A and securities matters, according to his LinkedIn profile.

Miller and his law firm "knowingly imbued McKnight’s scheme with an air of legitimacy and gave investors a false sense of security, thereby furthering McKnight’s deception," the SEC said.

Gregory Frost, Miller's partner at the firm, was not named as a defendant. He did not respond to a request for comment.

Frost & Miller sued McKnight in 2021 after one of the investors he took money from threatened to sue the law firm. McKnight and the other defendants named in that lawsuit never filed appearances in that case, which is ongoing in Manhattan federal court.

The case is Securities and Exchange Commission v. Aaron Cain McKnight, et al, U.S. District Court for the Northern District of Texas, 3:23-cv-00641

For the SEC: Anna Area and David Reece of the SEC

Reporting by David Thomas
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