Litigation Release No. 22485 / September 19, 2012
Securities and Exchange Commission v. Angelo A. Alleca, et al., Civil Case No. 1:12-cv-03261-WSD (N.D. Ga.)
SEC CHARGES ATLANTA-BASED ADVISER WITH OPERATING PONZI-LIKE SCHEME INVOLVING PRIVATE INVESTMENT FUNDS
The Securities and Exchange Commission filed a civil complaint on September 18, 2012 against Angelo A. Alleca, a private fund manager and his Atlanta-based investment advisory firm, Summit Wealth Management, Inc. and three funds operated and controlled by Alleca for defrauding investors in a purported “fund-of-funds” and then trying to hide trading losses by creating new private funds to make money to pay back the original fund investors in Ponzi-like fashion. According to the SEC’s complaint Alleca and Summit Wealth Management offered and sold interests in Summit Investment Fund, LP, which they told their clients was operating as a fund-of-funds – meaning they were investing their money in other funds and investment products rather than directly in stocks and other securities. However, Alleca instead engaged in active securities trading with his clients’ money, and he incurred substantial losses. He concealed the Summit Fund trading losses from investors and provided them false account statements.
The complaint alleges that Alleca created at least two hedge funds to raise money from Summit Wealth clients – Private Credit Opportunities Fund, LLC and Asset Class Diversification Fund, LP. Alleca’s plan, according to the complaint, was to cover up the losses that he had incurred in Summit Fund by illegally transferring profits from the new funds in a Ponzi-like fashion in order to meet earlier redemption requests. However, Alleca’s plan backfired when those successive funds incurred further trading losses. Alleca continued to issue false account statements to investors in Summit Fund as well as the additional funds in order to hide the actual losses on their investments. The complaint alleges that, in total, Alleca raised approximately $17 million from approximately 200 clients of Summit Wealth Management.
The SEC’s complaint charges Alleca, Summit Wealth Management, and the three funds with violations of the antifraud provisions of the federal securities laws, Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933 and Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. On September 19, 2012, United States District Court Judge William S. Duffy entered an order enjoining Defendants from violating these provisions of the federal securities laws, freezing defendants’ assets, preventing the destruction of documents and expediting discovery. Defendants consented to the entry of the order without admitting or denying the allegations in the complaint.