The Securities and Exchange Commission has charged Onyx Capital Advisors, a Detroit-based private-equity firm, with allegedly bilking roughly $3 million from three of the city's public pension funds.

According to the April 22 complaint, the SEC said that it has pursued this recent civil action as an attempt to "stop an ongoing fraud" by Roy Dixon, Onyx’s owner and founding member, and Michael Farr, a friend of Dixon’s who "provided substantial assistance … in these misappropriations."

Collectively, the three Detroit-area pensions, whose names are not provided by the SEC, invested $23.8 million in the three-year-old firm’s Onyx Capital Advisory Fund I. The allocations were made in June 2007, court documents state.

Between 2007 and 2009, the 24-page complaint notes that Dixon, 46, and Onyx Capital made “numerous false and misleading statements to the pension funds,” including a forged letter misrepresenting its principals and misrepresented management fee amounts for the three-year old private equity fund.

Additionally, the SEC is claiming that Farr, 42, diverted money invested in the fund, diverting the money from three portfolio companies to other entities from which he withdrew the cash. The complaint explains some of Farr’s major withdrawals went toward the “building [of] a new multi-million dollar house for Dixon.”

“These public pension funds provided seed capital to the Onyx fund, and Dixon betrayed their trust by stealing their money,” Merri Jo Gillette, director of the SEC’s Chicago regional office, said in a press release. “Farr assisted Dixon by making large bank withdrawals of money ostensibly invested in Farr’s companies, and together they treated the pension funds’ investments as their own pot of cash.”

Furthermore, the federal watchdog is asking that Dixon, Farr and Onyx Capital Advisors be held accountable for their securities violations. It states that the defendants should "disgorge their ill-gotten gains and pay prejudgment interest and civil penalties."

Calls placed to Onyx Capital Advisors seeking comment were not immediately returned.

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