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Creator of 'Left Behind' Video Games Charged with Fraud

SEC files suit, suspends company's stock.

The maker of Left Behind-themed video games may have committed fraud by allegedly using a massive stock sale to give investors a false sense of financial stability.

The Securities and Exchange Commission (SEC) alleged last week that Troy Lyndon, CEO of Left Behind Games Inc. (LBG), issued close to 2 billion shares to his friend, Ronald Zaucha. Lyndon claimed the shares were payment for Zaucha's consulting services, but Zaucha's use of the money suggests otherwise.

Zaucha used the stock to boost the video game company's struggling finances by selling millions of unregistered shares in the marketplace, but gave the proceeds back to LBG, Reuters reports.

Both men have been charged with fraud in the SEC complaint, with nearly $5 million purportedly involved in the case.

The SEC lawsuit, which was filed in Hawaii where both Lyndon and Zaucha live, states:

"LBO's quarterly and annual reports were also misleading because they did not disclose that its transactions with Zaucha were related party transactions. Nor did they disclose the sham, round-trip nature of the transactions, where LBG essentially paid for its own revenue by paying Zaucha in stock and then having most of his stock sale proceeds used to purchase LBO product through Zaucha's company, Lighthouse."

Lyndon responded to the allegations on his website:

"Fact is, I'm just a video game guy. If any violation occurred, it would never have been intentional – and certainly, never fraudulent – my attorney told me that proceeds from earned shares could be used by any shareholder for their desired purpose. For more than two years, I've asked the SEC to explain how and if I violated any rule, so that I could self-report it."

The SEC believes Lyndon's sale of stock to Zaucha created an appearance of sound financial stability to investors, when the company was actually struggling to stay afloat. An SEC spokesman, Michele Wein Layne, told the The Press-Enterprise that the scheme "duped investors" and made them think LBG was a "successful enterprise."

The SEC also claims Zaucha, a prison ministries pastor, performed few, if any, consulting services. In 2010, he gave away $1.38 million worth of left-over video games inventory to churches, but counted it as revenue for the company, Reuters reports.

With multiple SEC case filings against Lyndon's company going back to 2010, Lyndon thinks the attacks are more personal than anything.

"Perhaps not intentional, the government's actions have worked to dismantle Left Behind Games, run by conservatives," said Lyndon. "The facts are both true and hard to believe—worthy of a Ron Howard film or John Grisham novel."

CT previously reported on LGB's name change and its legal issues.

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