SEC Claims Maker of Religious-Themed Left Behind Games Fraudulently Propped Up Revenue

The Securities and Exchange Commission is charging the maker of religious-themed vidgame company Left Behind Games with falsely inflating the company’s revenue by nearly 1,300% through a series of “scam” transactions.

The SEC filed its complaint in federal court in Hawaii late Tuesday, naming Left Behind Games CEO and CFO Troy Lyndon as well as Ronald Zaucha, described as a friend of Lyndon’s and a consultant to the company.

The crux of the complaint is that Lyndon had Left Behind Games issue almost 2 billion shares of stock to Zaucha as compensation for consulting services. The SEC alleges that the “true purpose” was to enable Zaucha to sell millions of unregistered shares of Left Behind Games stock in the market and then kick back a portion of his proceeds in order to prop up the company’s revenue.

The SEC suspended the company’s stock on Wednesday.

On his website, Lyndon said in a long post that “for more than two years, I’ve asked SEC to explain how and if I have violated any rule, so that I could self-report it. As I see it, the government has systematically and intentionally conspired to dismantle Left Behind games and the facts are both true and hard to believe — worthy of a Ron Howard film or a John Grisham novel.” Among other things, he wrote that the private securities regulator org FINRA had ignored his complaint in 2008 that the Tides Foundation “had possibly used government funds to intentionally launch a smear campaign in 2006 because of our affiliation to religious and political conservative Tim LaHaye.” Lyndon was referring to the co-creator of the highly successful “Left Behind” series of novels.

But Michele Wein Layne, director of the SEC’s Los Angeles office, said in a statement that “Lyndon essentially gave Zaucha stock in exchange for phony revenue streams that created an inaccurate portrait of the company’s financial health.”

Left Behind Games was founded in 2001 and billed itself as the “world leader in the publication of Christian video games,” the SEC said, but the company was in such dire financial straits by 2011 that it laid off all of its employees and closed its office.

The SEC claims that consulting agreements that Zaucha made with the company were vague, including one that stated he would build an “independent rep network” to contact church pastors and offer the game products, but that there really was no such network.

Federal officials say that Lyndon and Zaucha “concocted” the scheme in 2009 to save the company. In one instance, the SEC claims, Zaucha formed a company called Lighthouse Distributors and used the proceeds of stock sales to finance the purchase of $1.38 million in old and obsolete inventory of the games. Lighthouse gave away the products to church and religious groups, but Left Behind Games recognized it as revenue even though they were “sham transactions,” the SEC said.

The SEC’s complaint claims fraud and violations of other securities regulations. It seeks injunctions against Lyndon and Zaucha, restricting certain business activities, as well as financial penalties and recovery of their gains from the stock transactions.

Lyndon chided the SEC for filing “as many lawsuits as possible without recognizing how such litigation has contributed to the loss of thousands, virtually half of America’s public companies.” He said on his website that he plans to post more details “from time-to-time as the story unfolds.”

“Fact is, I’m just a video game guy,” he wrote. “If any violation occurred, it would never have been intentional — and certainly, never fraudulent — my attorney told me that any person that earned shares could use them for any purpose.”

Popular on Variety

More Biz

  • Harvey Weinstein

    Weinstein Can Get a Fair Trial in Manhattan, Says D.A.

    The Manhattan District Attorney’s office argued on Friday that Harvey Weinstein can get a fair trial in Manhattan, and blamed the producer’s defense team for much of the pre-trial publicity in the case. Weinstein’s attorneys have asked an appellate court to transfer the case — which is set to begin on Sept. 9 — to [...]

  • Leonardo DiCaprio Madonna

    Leonardo DiCaprio, Madonna Call for Action on Amazon Wildfires

    As wildfires rage at an alarming rate in Brazil’s Amazon rain forest, celebrities are using their platforms to bring awareness to the deforestation’s impact and to call for action. In the past week, stars like Leonardo DiCaprio, Madonna, Cara Delevingne and Ariana Grande have taken to Instagram to express their frustration with the lack of [...]

  • 'The Durrells' TV Show

    Greece Sweetens Production Incentives as Struggling Country's Economy Rebounds

    It’s taken the better part of a decade for Greece to show signs of recovery from the crippling crisis that almost pushed it out of the Eurozone. Now, with the economy slowly on the mend, the government is doubling down on efforts to jump-start the local film industry, giving a dramatic overhaul to the incentive [...]

  • Warner Music Group Partners With Audiomack

    Warner Music Group Partners With Audiomack

    Warner Music Group announced it has entered a partnership with the music streaming and discovery service Audiomack, marking the platform’s first licensing deal with a major label. According to the announcement, the two companies will work together on content concepts and explore ways to break emerging artists, connecting music fans with rising talent before they [...]

  • Scooter Braun Congratulates Taylor Swift on

    Scooter Braun Congratulates Taylor Swift on ‘Brilliant’ Album and Campaign

    Two days after Taylor Swift fired off the latest salvo in her battle with Scooter Braun, the manager congratulated the singer on the campaign around her “brilliant” new album, “Lover,” which arrived last night. The message came after Swift said she will be re-recording songs from her first six albums, which are now owned by [...]

  • David Koch Obit

    David Koch, Libertarian Activist and Billionaire Philanthropist, Dies at 79

    David Koch, brother of Charles Koch and one of the owners of Koch Industries, the second-largest private company in the U.S., has died at 79. According to the New York Times, Charles Koch announced the news of his brother’s death in a statement. Though he did not attribute to David’s death to a particular cause, [...]

  • Beverly Hills Realtor Accused of Stealing

    Beverly Hills Realtor Accused of Stealing From Usher, Adam Lambert

    A Beverly Hills real estate agent has been arrested on charges of stealing from the homes of celebrities, including Usher, Adam Lambert and “Real Housewives” star Dorit Kemsley. Jason Emil Yaselli, 32, is accused of encouraging an accomplice, Benjamin Ackerman, to enter homes during open houses in order to steal from them. Ackerman allegedly sold [...]

More From Our Brands

Access exclusive content