SEC Charges Phony Hedge Fund Manager with Defrauding Small Companies
JUN 12, 2015 - 7:38 am
The Securities and Exchange Commission announced fraud charges against a New Jersey man accused of posing as a hedge fund manager and defrauding small companies out of more than $4 million.
The SEC alleges that Nicholas Lattanzio falsely promised small businesses that he would arrange project financing for them and generate substantial returns on money they invested in his Black Diamond Capital Appreciation Fund. He told them they could withdraw their money if the promised project financing didn’t materialize, and he claimed his fund had as much as $800 million under management and a proven track record of producing double-digit returns.
According to the SEC’s complaint filed in federal court in New Jersey, the fund never had more than approximately $5 million in assets as Lattanzio simply took investor money and spent it on himself and his family. He allegedly used fund assets to purchase a million-dollar home in Montclair, NJ, a $124,000 luxury car, and $100,000 worth of merchandise from Tiffany & Co. He also paid off more than $760,000 in credit card debt, withdrew approximately $570,000 in cash or checks written to himself and his girlfriend, paid more than $30,000 to a yacht broker, and funded his children’s private school tuition and his membership at an exclusive golf club.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Lattanzio, and the New Jersey Bureau of Securities within the State Attorney General’s Division of Consumer Affairs also announced sanctions against him.
The SEC’s complaint charges Lattanzio, Black Diamond Capital Appreciation Fund, and three other Lattanzio-controlled entities with securities fraud in violation of the Securities Act of 1933 and Securities Exchange Act of 1934. The complaint also charges Lattanzio and some of the entities with investment adviser fraud in violation of the Investment Advisers Act of 1940.
“As alleged in our complaint, Lattanzio masqueraded as a sophisticated hedge fund manager to capitalize on small businesses’ legitimate need for financing. He falsely reassured his investors they were earning profits while he was swiping their money to bankroll his affluent lifestyle that he otherwise could not afford,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
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