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Regulation and Compliance > Federal Regulation > SEC

SEC Charges Exec Who Took Over ‘Hamilton’ Ticket Ponzi Scheme: Enforcement

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The Securities and Exchange Commission charged a New York City man with continuing a previously charged scheme, stealing millions of dollars from investors who were allegedly falsely promised their funds would be used for the purchase and resale of tickets to Broadway shows and a sporting event.

According to the SEC’s complaint, James Siniscalchi, chief compliance officer of a company that claimed to have special access to profitable and highly sought-after event tickets, knowingly misused investor money to benefit himself and his extended family.

The SEC alleges that Siniscalchi and his business partners rebranded businesses formerly run by his cousin, Joseph Meli, who ultimately settled to SEC fraud charges and pleaded guilty to securities fraud in a parallel criminal action, and that this rebranding was done with Meli’s knowledge and help.

“As alleged in our complaint, investors were lured in with promises of big profits, but Siniscalchi really just took over his cousin’s fraudulent scheme to steal money,” said Paul Levenson, director of the SEC’s Boston Regional Office. “Even after charging Meli, who is now in prison for his similar scam, the SEC’s investigative team continued working to protect investors from related bad conduct.”

In the wake of Meli’s arrest, Siniscalchi and his business partners allegedly raised approximately $2.7 million net from investors. The investors were allegedly promised their money would be used only to purchase tickets to events including the Broadway shows “Harry Potter and the Cursed Child,”" Hello Dolly” and “Bruce Springsteen on Broadway,” and a professional boxing match between Floyd Mayweather Jr. and Conor McGregor.

In reality, Siniscalchi allegedly misused investor funds to benefit himself and Meli and his family.

The SEC alleges that Siniscalchi took steps to conceal from investors Meli’s involvement given the widely publicized civil and criminal cases that were then pending against Meli. In efforts to hide Meli’s role, Siniscalchi allegedly instructed staff not to include Meli on emails to investors, and referred to Meli as “Keyser Soze,” in reference to a fictional movie character from the movie “The Usual Suspects” who secretly operated as a crime kingpin.

The SEC’s complaint seeks a permanent injunction from future violations, disgorgement of allegedly ill-gotten gains, with interest, and financial penalties.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Siniscalchi and Meli.

SEC Charges San Diego Advisor With Running a Ponzi Scheme

The SEC charged Christopher Dougherty and several entities he controlled, with operating a Ponzi scheme that defrauded his investment advisory clients out of $7 million.

The SEC alleges that Dougherty provided investment advice to school district employees, hospital employees, veterans and neighbors, most of whom were unsophisticated investors.

According to the SEC’s complaint, Dougherty had his own California-registered investment advisor, C&D Professional Services Inc., and through C&D, offered clients the opportunity to invest in tax-free “private placements” that purportedly provided quarterly dividends of about 5%.

The complaint alleges that, in reality, there were no private placements. Dougherty was simply running a Ponzi scheme by taking new investor money and using it to pay quarterly dividends to existing investors and his personal expenses. According to the complaint, Dougherty also offered investors the opportunity to invest in his farm, JTA Farm Enterprise, and his real estate business, JTA Real Estate Holdings, but investor funds in these ventures were commingled with the C&D investments and used as part of the Ponzi scheme fraud as well.

Dougherty and his wife filed for personal bankruptcy in October.

The SEC’s complaint seeks relief including permanent injunctions, disgorgement of ill-gotten gains plus interest, and civil penalties.

The San Diego District Attorney’s Office separately announced criminal charges related to the same conduct.

SEC Freezes Assets in Connection With Alleged Insider Trading

The SEC announced the entry of an emergency court order freezing assets related to alleged insider trading that yielded approximately $2.5 million in profits in connection with the April 12 announcement that oil-and-gas conglomerate Chevron Corp. intended to acquire Anadarko Petroleum Corp.

The SEC’s complaint identifies a series of suspicious transactions prior to the announcement that Chevron intends to acquire all of Anadarko’s outstanding shares for $65 per share in cash and stock, representing a 38% premium over Anadarko’s pre-announcement closing price.

The traders, who are currently unknown, allegedly used foreign brokerage accounts in the United Kingdom and Cyprus to purchase out-of-the-money call options through U.S.-based brokerage firms and on U.S.-based exchanges in the days leading up to the announcement.

Following the acquisition announcement, Anadarko’s shares rose significantly and the brokerage account customers profited by either selling many of the option contracts at a profit or exercising the options to acquire large positions of Anadarko stock at steep discounts.

The court’s order freezes the proceeds related to the foreign accounts’ trading.

The order also requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading.

The SEC’s complaint is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest, imposing civil penalties, and permanently enjoining them from future violations.

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