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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20372 / November 27, 2007

SEC v. Rabinovich & Associates, LP, Alex Rabinovich and Joseph Lovaglio, 07 Civ. 10547(GEL) (S.D.N.Y.)

SEC Obtains Temporary Restraining Order, Asset Freezes and Other Emergency Relief to Halt Offering Fraud Targeting Seniors

On November 26th, the Commission obtained an order temporarily restraining Alex Rabinovich, Rabinovich & Associates, LP, an unregistered investment company and broker-dealer managed by Rabinovich, and Joseph Lovaglio, from continuing to engage in a fraudulent offering of securities. The court also froze the defendants' assets, ordered the defendants to promptly provide sworn accountings, ordered that discovery be accelerated and that defendants be prohibited from destroying documents, and ordered that a preliminary injunction hearing be held on December 12, 2007 to determine if the interim relief should be continued.

The Commission's complaint, filed on November 26, alleges that defendants, operating out of a storefront boiler room in Brooklyn, have been selling limited partnership interests in Rabinovich & Associates (sometimes referred to hereafter as the "Fund" or the "firm") and other securities to investors, including senior citizens and retirees. The Complaint further alleges that the defendants obtain investments in the Fund by cold-calling and have made, and are continuing to make, fraudulent statements to investors and prospective investors in the Fund, including: (1) false claims that the Fund has been extraordinarily profitable whereas the Fund's actual performance has been dismal; and (2) false representations that Rabinovich & Associates is a Wall Street firm and a member of the NASD, the New York Stock Exchange, and the Securities Investor Protection Corporation. The defendants allegedly have also failed to disclose to investors that Rabinovich has been barred by the NASD from associating with any broker or dealer and that there is a pending action by the Financial Industry Regulatory Authority, Inc. ("FINRA") seeking to bar Lovaglio from associating with any broker or dealer.

According to the complaint, the defendants have raised at least $550,000 from at least twenty-three investors, and have lost most of that money, even while providing investors with quarterly account statements that reflect large gains and "dividends" in every period. The complaint further charges that investors are located across the country and the firm targets senior citizens and unsophisticated investors -- at least eleven of the Fund's investors are allegedly sixty years old or older, including three who are in their seventies and three who are in their eighties

The complaint names as defendants the following entity and individuals:

  • Rabinovich & Associates, LP, a limited partnership, purportedly organized in December 2002 and located at 14 Wall Street, New York, NY. In fact, according to the complaint, the firm's offices are actually located in an unmarked storefront at 502 Gravesend Neck Road, Brooklyn, NY. The firm purports to be an "independent investment company whose affiliates offer a broad array of financial products and services." According to the complaint, the firm is actually an unregistered investment company and an unregistered broker-dealer operating a boiler room.
     
  • Alex Rabinovich, age 29, and a resident of Brooklyn, New York. Rabinovich is the general partner of Rabinovich & Associates and a self-described "private wealth manager." Rabinovich has worked at series of broker-dealers, each of which has been the subject of significant disciplinary action, and has himself been subject to disciplinary action, including a bar from association with any NASD member in any capacity.
     
  • Joseph Lovaglio, age 25, and a resident of Brooklyn, New York. Lovaglio is a managing director of Rabinovich & Associates and the head of its sales operation. Since 1998, he has worked for at least four financial firms, at least three of which have been the subject of law enforcement action. Lovaglio is the subject of a pending FINRA proceeding based on his failure to provide FINRA with requested information and documents in connection with a customer allegation of fraud.

The Complaint charges that the defendants have defrauded Fund investors and prospective investors, are unlawfully operating as unregistered broker-dealers and offering and selling securities in an unregistered offering; and that defendant Rabinovich & Associates is unlawfully operating as an unregistered investment company. The complaint thus alleges that all defendants have violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934; that Rabinovich has violated Section 206(4) of the Investment Advisers Act of 1940 and Lovaglio has aided and abetted those violations; and Rabinovich & Associates has violated Section 7(a) of the Investment Company Act of 1940. In addition to emergency and preliminary relief, the complaint seeks permanent injunctions, disgorgement and civil penalties.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/2007/lr20372.htm

Modified: 11/27/2007