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Regulation and Compliance > Federal Regulation > SEC

SEC Charges 2 Fake Brokers, Ex-Broker in Investor Fraud

By Melanie Waddell

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The Securities and Exchange Commission on Wednesday charged two men posing as brokers with stealing investor money they raised for limited liability companies they owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company.

The SEC alleges that James R. Trolice and Lee P. Vaccaro raised approximately $6 million from more than 100 investors by creating “a false sense of urgency and exclusivity around the offering, claiming that only a limited amount of warrants were available and that they eventually could be exercised at a very profitable price.”

The SEC’s complaint, filed Wednesday in federal court in Newark, New Jersey, also charges former stockbroker Patrick G. Mackaronis, who received commissions for bringing prospective investors to Trolice and Vaccaro so they could close the sales.

According to the SEC, Trolice further lured investors by showcasing his apparent wealth and hosting elaborate investor parties at his multimillion-dollar home. He also touted his purported track record of bringing startup companies public and obtaining high returns for investors.

Meanwhile, the SEC states that Trolice allegedly used investor funds to pay his mortgage along with other bills for a credit card, car lease, college tuition and landscaping. Vaccaro allegedly spent at least a quarter-million dollars in investor funds at Las Vegas casinos.

The SEC says neither Trolice nor Vaccaro was registered with the SEC or any state regulator.

“We allege that Trolice and Vaccaro lied to investors about the nature of the investment, created a phony aura of success, and ultimately funded their own lifestyles rather than investing all the money as promised,” said Andrew Calamari, director of the SEC’s New York Regional Office. “The SEC continues to pursue and investors should continue to be aware of unregistered brokers selling investments.”

The complaint charges Mackaronis with ignoring fraud risks and blindly touting the opportunity to family members, friends and brokerage clients while knowing very little about the investments themselves.

Mackaronis has agreed to settle the SEC’s charges by disgorging the $85,000 in commissions he received plus paying $8,486.91 in interest and a $50,000 penalty. He also agreed to a three-year bar from the securities industry. The settlement is subject to court approval.

In parallel actions, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Vaccaro, and the New Jersey Bureau of Securities announced civil charges against Trolice, Vaccaro and Mackaronis.

The SEC’s investigation is continuing.

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