Podcast Center
Video Center
Webcasts
Resource Center
Events
February 03, 2017 at 03:58 AM
The Securities and Exchange Commission charged a Connecticut-based investment advisory business and its owner with stealing money from investors to settle a private lawsuit among other misuses.
The SEC alleges that Sentinel Growth Fund Management and its founder Mark J. Varacchi misrepresented to investors that money they deposited with the firm would be allocated to up-and-coming hedge fund managers for investment purposes.
Sentinel Growth Fund Management was not registered with the SEC or any state to do business as an investment advisor.
According to the SEC’s complaint, Varacchi and Sentinel Growth Fund Management did not transfer all the money as promised, instead commingling investor assets and manipulating account activity, account balances and investment returns as part of a scheme to siphon away investor funds.
Varacchi and his firm allegedly stole at least $3.95 million from investors, including more than $1 million to settle litigation brought by Varacchi’s prior employer.
“As alleged in our complaint, Varacchi promised investors that their money would be routed to up-and-coming hedge fund managers when in reality he was diverting significant portions for personal use and unauthorized business expenses,” Anthony S. Kelly, co-chief of the SEC Enforcement Division’s Asset Management Unit, said in a statement.
The SEC’s complaint seeks disgorgement and penalties against Varacchi and Sentinel Growth Fund Management. The complaint also names two hedge funds as relief defendants for the purposes of recovering investor assets in their possession.
SEC Fines California Man in Golf Resort Investment Scheme
The SEC charged a Southern California man with defrauding investors and misappropriating more than $1.3 million from a real estate investment fund he controlled, Caliber Partnership I LLC.
The SEC alleges that Paul A. Garcia of Newport Beach, California, raised $675,000 from 13 investors in 2014 and 2015 by claiming that Caliber would use their money to purchase an unfinished golf resort and then join a large real estate venture that was poised to go public. But as investor money came in, Garcia caused Caliber to borrow heavily to finance two real estate purchases and misappropriated more than $1.3 million of the borrowed funds and investor funds through separate companies he controlled.
The SEC further alleges that Richard T. Woods of Southlake, Texas, negligently misrepresented Caliber’s prospects in marketing materials that he authored and Garcia approved and used to attract investors.
According to the SEC’s complaint, the victims of the fraud included an 82-year-old who lost $250,000.
To settle the charges, Garcia, Caliber and the other companies involved in the fraud agreed to pay a total of more than $3.3 million in penalties and disgorgement of ill-gotten gains plus interest. Garcia also agreed to a court order prohibiting him from participating in securities offerings and from serving as an officer or director of a public company.
Woods agreed to be enjoined from future violations and to pay a penalty and disgorgement totaling approximately $30,000. All settling parties agreed to the sanctions without admitting or denying the allegations in the complaint.
SEC Charges Unregistered Broker With Bilking Family, Clients in Real Estate Scheme
The SEC filed a civil action on Jan. 31 in U.S. District Court for the Central District of California against Patric Ken Baccam, alleging that he conducted a fraudulent offering and sales of securities. The SEC also says that he acted as an unregistered broker by selling some of those securities away while associated with, and failing to disclose the sales to, Centaurus Financial Inc., a dually registered broker-dealer and investment advisor.
The Commission’s complaint alleges that, from October 2010 through July 2013, Baccam raised approximately $963,000 through the offer and sale of unsecured promissory notes to 18 brokerage customers and family members, representing the notes would be used to fund a venture “flipping” real estate for a profit.
According to the complaint, Baccam knowingly or recklessly made multiple fraudulent statements regarding the safety of the investments, the promised returns on investment, the use of investor funds, and the nature and experience of the issuers.
