SEC Charges Asset Manager for Stealing Client Assets and Due Diligence Failures

Litigation Release No. 24205 / July 17, 2018

Securities and Exchange Commission v. John Geraci, No. 18-CV-06432 (S.D.N.Y.)

The Securities and Exchange Commission today announced fraud charges against a Miami-based asset manager accused of perpetuating lies about his portfolio manager's investment performance and assets under management, and for stealing approximately $1 million of client funds.

The SEC alleges that John Geraci formed the Meridian Matrix Long Short Equity Fund in 2015, and hired Nicholas Mitsakos and his company, Matrix Capital Markets, as the fund's portfolio manager. Mitsakos had no assets under management, but falsely claimed that he managed millions of dollars of assets and that he had generated returns of up to 66 percent in preceding years. Rather than verifying these claims, the complaint alleges that Geraci used Mitsakos' false and unsubstantiated claims to market his fund, and eventually obtained $2 million from investors. Geraci later learned of Mitsakos' deception, and that he had misappropriated approximately $800,000 of the investors' money, but continued to market the fund and to let Mitsakos trade the clients' assets. Mitsakos returned approximately $1 million of the funds to Geraci, which Geraci then misappropriated for his own use, telling his clients that Mitsakos had lost all of it.

The SEC's complaint, filed in U.S. District Court for the Southern District of New York, charges Geraci with violating the antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, an officer and director bar, and disgorgement of ill-gotten gains plus penalties. The SEC previously obtained a judgment against Mitsakos, and he pleaded guilty in a parallel criminal action.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Geraci. The SEC's investigation was conducted by Alison R. Levine and Kevin P. McGrath, and was supervised by Lara S. Mehraban. The litigation will be led by Ms. Levine and Mr. McGrath. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Alabama Securities Commission.