U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission


Litigation Release No. 20798 / November 3, 2008

Securities and Exchange Commission v. Frank J. Russo et al. (United States District Court for the District of Massachusetts, C.A. No. 06-10984-RGS)


The Securities and Exchange Commission announced today that on October 28, 2008, a final judgment by default was entered by the federal court in Boston, Massachusetts, against relief defendant Veritasiti Corporation d/b/a MediaData Corporation ("Veritasiti") in an enforcement action filed in the United States District Court for the District of Massachusetts. Veritasiti was ordered to pay over $14 million in disgorgement and prejudgment interest.

On June 6, 2006, the Commission filed a complaint alleging that Frank J. Russo, formerly of Wakefield, Massachusetts, operated a fraudulent ponzi scheme through his investment advisory corporation FJR Corporation. Russo, the Commission alleged, raised at least $15 million from at least 160 investors in 12 states to invest in two limited partnerships he controlled: Russo Associates Limited Partnership and Eliot Partners. On June 28, 2006, the Commission filed an amended complaint in the action naming Veritasiti, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud perpetrated by Russo.

The amended complaint alleged that while Russo told investors that their funds were being invested in bonds and other investment securities, and that the investments were safe and conservative, he diverted at least $11.5 million in investor funds to Veritasiti, a corporation that Russo formed with a college acquaintance. The amended complaint further alleged that Russo was Veritasiti=s chief financial officer and that he was one of two directors. According to the amended complaint, Russo did not disclose the purported investment in Veritasiti to investors in the limited partnerships. To the contrary, the amended complaint alleged that he sent false and misleading account statements to investors reporting fictional returns in excess of 10% and making false statements concerning the investment strategies of the limited partnerships. The amended complaint alleged that Veritasiti has no legitimate claim to the funds and that it was unjustly enriched by its receipt of those funds. The amended complaint sought disgorgement of all funds diverted to Veritasiti. The default judgment, entered on October 28, 2008, orders Veritasiti to pay disgorgement of $11.9 million plus prejudgment interest of $2.2 million for a total of $14.1 million.

In a parallel criminal proceeding, Russo pled guilty to federal charges of investment fraud and mail fraud. On February 25, 2008, he was sentenced to 18 years in prison to be followed by 3 years of supervised release and ordered to pay $20 million in restitution and a $500,000 fine. Russo has also been barred by the Commission from any future association with any investment adviser based on his criminal conviction. The Commission's civil action is still pending against Russo and his entities (FJR Corporation, Russo Associates Limited Partnership, and Eliot Partners).

For further information, see Litigation Release Nos. 19718 (June 6, 2006), 19744 (June 28, 2006), 20103 (May 3, 2007), 20468 (February 27, 2008) and Investment Adviser Release No. 2720 (March 12, 2008).



Modified: 11/03/2008