U.S. Securities and Exchange Commission
Litigation Release No. 21701 / October 20, 2010
SECURITIES AND EXCHANGE COMMISSION v. CARLO G. CHIAESE, ET AL., Civil Action No. 10-cv-5110 (WJM) (D.N.J.)
COURT ENTERS PRELIMINARY INJUNCTION AGAINST INVESTMENT ADVISER CARLO G. CHIAESE AND HIS FIRM, C.G.C. ADVISORS, LLC
The Securities and Exchange Commission announced that on October 19, 2010, the United States District Court for the District of New Jersey entered a preliminary injunction order against defendants Carlo G. Chiaese, age 38 and resident of Springfield, New Jersey, and his company, C.G.C. Advisors, LLC, and relief defendant Micol Chiaese. Pending a final disposition of the Commission’s enforcement action, the preliminary injunction order enjoins the Defendants from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The preliminary injunction order also requires Defendants to prepare a written verified accounting and freezes the Defendants’ and Relief Defendant’s assets pending a final disposition of the Commission’s enforcement action.
The Commission’s complaint, filed on October 5, 2010, alleged that, between 2008 and the present, Chiaese and CGC misappropriated at least approximately $2.5 million from at least six of their advisory clients, including a union pension trust fund for the benefit of approximately 880 members. Chiaese repeatedly made false and misleading statements to his clients regarding the clients' investments, including creating and providing to clients fictitious, self-generated account statements that (i) misrepresented the value of their investments and (ii) falsely stated that their investments were safely held at a broker-dealer. In fact, Chiaese and CGC had misappropriated their clients' funds. Instead of investing these funds as Chiaese promised, he used much of his clients' funds to support his lavish lifestyle, including: mortgage payments on a million dollar home; approximately $32,000 on landscaping; approximately $70,000 on multiple country clubs; approximately $12,000 on his child's private school tuition; approximately $4,000 at a New York City hotel on New Year's Eve 2008; thousands of dollars on expensive cars; tens of thousands of dollars per month in living expenses; and numerous cash withdrawals. Micol Chiaese, an officer of CGC, benefited from this fraud by directly receiving at least $261,300 of clients' funds.
On October 5, 2006, the Court granted, among other emergency relief, temporary orders freezing the Defendants’ and Relief Defendant’s assets. In its enforcement action, the Commission is seeking additional relief, including orders permanently enjoining Chiaese and CGC from committing future violations of the foregoing federal securities laws, and a final judgment ordering Chiaese, Micol Chiaese and CGC to disgorge their ill-gotten gains plus prejudgment interest, and assessing civil penalties against Chiaese and CGC.