On February 13, 2004, the Securities and Exchange Commission filed securities fraud charges against "Patrollers Capital Fund" and its principal, Franklin S. Marone, Jr. The SEC alleges that, between January 1999 and January 2004, Marone fraudulently obtained over $3.2 million from dozens of investors by inducing them to invest in several fictitious "equity funds" that Marone purported to manage. According to the Commission's complaint, Marone falsely promised investors extraordinary returns at virtually no risk and sent investors falsified account statements reporting the current value of their investments. In reality, the complaint alleges that Marone never invested his victims' investment proceeds. Instead, he and his wife, Relief Defendant, Marita D. Marone, used investors' funds to support their lavish lifestyle, including the purchase of cars, boats, snowmobiles, and trips to Europe. In a February 9, 2004, written statement to law enforcement authorities, Marone admitted defrauding investors out of at least $1.9 million. The complaint alleges that the actual total amount Marone misappropriated was at least $3.2 million.
Upon the SEC's request, filed simultaneously with the SEC's complaint, United States District Judge Naomi R. Buchwald of the Southern District of New York issued a temporary restraining order which, among other interim relief, froze the assets of Marone, his purported "equity funds," and his wife. The Court scheduled a hearing for February 27, 2004, on the SEC's application for a preliminary injunction.
The SEC charges Marone and Patrollers Capital Fund and its related funds, Patrollers Capital I, II and III, The Wedel Fund and The Whistler Fund with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to interim relief granted, the SEC is seeking a judgment of permanent injunction, disgorgement of ill-gotten gains, and civil monetary penalties.
