SEC Building (Credit: AP)

A small, privately run company and its president, owner and manager, Richard Ventrilla, scammed at least 22 clients out of nearly $1 million before Ventrilla was found dead at his home in a suburb of Buffalo, New York, earlier this month at age 61, according to the Securities and Exchange Commission.

In a complaint filed last week in the U.S. District Court for the Northern District of New York in Buffalo against Cygnus Capital Management and Ventrilla’s estate, the SEC said clients who invested a total of about $989,000 were defrauded.

The case was transferred to the U.S. District Court for the Western District of New York, by order of Magistrate Judge Therese Wiley Dancks on Sept. 15, court documents show. The court was “advised that this matter was filed in the incorrect district,” according to the order.

From at least September 2015 through March 2020, Cygnus and Ventrilla — a Clarence, New York, resident convicted of extortion in 1999 — made false and misleading statements to investors and misappropriated assets from advisory clients, the regulator says.

Ventrilla allegedly told investors he would invest their funds in publicly traded securities and repay them with trading profit. He also promised them a rate of return of 7%-8%.

The complaint alleges that, in reality, Ventrilla had no basis for these statements and used only about 10% of total investor funds to trade securities, spending the majority of investor funds to instead support his lifestyle or repay other investors.

Further SEC Issues

The SEC also alleges that Ventrilla led at least 16 investors who’d become advisory clients to believe he would manage their assets using separately managed accounts and pay himself “a reasonable investment advisory fee.” Instead, Ventrilla misappropriated a significant chunk of their funds to support his lifestyle and lied to clients about their purported portfolio holdings, according to the regulator.

“Ventrilla knowingly or recklessly deceived the Note Investors by misleadingly omitting to tell them that he was using the vast majority of investor funds for his personal purposes, such as ATM cash withdrawals, food, healthcare, and transportation,” according to the complaint.

“Even his limited trading was not very successful, and Ventrilla was able to pay Note Investors their quarterly returns only by using money from other investors in a Ponzi-like manner,” according to the complaint.

Neither Ventrilla nor Cygnus had registered with the SEC or any state as an investment advisor or in any other capacity, the regulator says.

The SEC’s complaint charged Cygnus and, for Ventrilla’s misconduct, Ventrilla’s estate with violations of the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

The regulator is seeking disgorgement plus prejudgment interest against Ventrilla’s estate, and permanent injunctive relief, civil penalties and disgorgement plus prejudgment interest against Cygnus.