Investment Advisor Charged by SEC with Stealing from Investors
The Securities and Exchange Commission (“SEC”) announced that its team of lawyers has brought a fraud claim against a registered investment advisor (“RIA”) Sentinel Growth Fund Management and its founder Mark J. Varacchi. The attorneys filed the lawsuit alleging that Mr. Varacchi used Sentinel Growth Fund Management to breach their fiduciary duties and steal money from investors. Effectively, the SEC alleges that Mr. Varacchi and Sentinel Growth were simply “part of a scheme to siphon away investor funds.” The claim alleges several violations related to securities fraud under the Securities Exchange Act of 1934, The Securities Act of 1933, and the Investment Advisors Act of 1940. The lawsuit also alleges that Mr. Varacchi aided and abetted the violations of Sentinel Growth.
According to the SEC, investors were led to believe that the deposited money was to be allocated to investments with new and promising hedge fund managers. Rather than actually invest the money as promised to, and expected by, the investors, the SEC complaint alleges that, Mr. Varacchi and Sentinel Growth failed to keep separate accounts for each investors’ money, which is referred to as comingling, stole much of the investors’ money, and used that money for personal expenses and unauthorized business expenses. Allegedly, some of the money was used to pay prior investors in Ponzi-scheme like fashion, another $1 million or more was used to settle litigation against Mr. Varacchi by a previous employer, and more money was diverted to various other expenses. In total, the SEC alleges that Mr. Varacchi and Sentinel Growth breached their fiduciary duties to their clients and their fraud cost the investors $3.95 million.
Mr. Varacchi and Sentinel Growth were not properly registered to do business as an investment advisor or registered advisor representative with the SEC or any state. Securities regulations require any investment advisor seeking to do business with the public to register either at the federal or state level, depending on factors such as amount of assets they are managing and what kinds of clients they have. Mr. Varacchi’s failure to register is yet another alleged violation of applicable securities laws and regulations.
The SEC attorneys are seeking the disgorgement of money received by Mr. Varacchi and his fund, as well as additional penalties. The SEC has also named as defendants Radar Alternative Fund, LP and Radar Alternative Master Fund, SPC based upon a claim that these hedge funds hold investor assets from Mr. Varacchi which should be returned.
Our securities fraud law firm works with investors who have sustained investment losses due to the carelessness, negligence, fraud or other wrongful acts of members of the securities industry. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.