SEC Charges Private Investment Firm with Fraudulently Misleading Investors
Litigation Release No. 24710/ January 8, 2020
Securities and Exchange Commission v. ARO Equity, LCC et al., Civil Action No. 19-civ-10027 (D Mass., filed January 8, 2020)
The Securities and Exchange Commission charged MA-based private investment firm ARO Equity, LLC, and its principals, Thomas D. Renison and Timothy J. Allcott, with fraud. As alleged, the defendants made false statements to current and prospective retail investors about ARO Equity's performance and used investor funds to pay interest to other investors.
According to the SEC's complaint, in July 2014, Renison, a CT resident, was barred by the SEC from, among other things, associating with any investment adviser or broker dealer. Nevertheless, the complaint alleges that from at least July 2015 through June 2018, Renison violated this bar when he, along with Allcott, a MA-resident, formed ARO Equity and raised approximately $6 million from at least 15 investors. The SEC's complaint alleges that Renison and Allcott falsely touted ARO Equity's success to encourage potential investors to cash out of their retirement products and invest with them in ARO Equity. The complaint alleges that soon after the defendants launched the firm, ARO Equity's investments began to fail. Rather than inform their investors of the losses, Renison and Allcott continued to falsely promote ARO Equity's success and the security of investing with them. Among other false statements, Renison and Allcott allegedly told investors that ARO Equity had double-digit returns, that there was no downside to investing with the firm, and that the investors' money was as safe as being in a bank. In reality, ARO Equity had experienced significant losses and had to use new investor funds to pay interest to older investors.
The SEC's complaint alleges that ARO Equity, Renison, and Allcott violated the antifraud provisions of Section 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) and 206(2) of the Investment Advisers Act of 1940. The complaint further alleges that Renison violated Section 15(a) of the Exchange Act. The Commission's complaint seeks a permanent injunction, conduct-based injunctions against Renison and Allcott, disgorgement plus prejudgment interest, civil penalties, and an order from the Court requiring Renison to comply with the SEC's 2014 bar.
The SEC's case is being handled by Eric M. Brooks, Patrick J. Noone, Frank C. Huntington, and Kevin B. Currid of the SEC's Boston Regional Office.