SEC Obtains Final Judgment Against Miami-Based Asset Manager Who Stole Approximately $1 Million of Client Funds
Litigation Release No. 24904 / September 17, 2020
Securities and Exchange Commission v. John Geraci, No. 18-cv-06432 (S.D.N.Y. filed July 17, 2018)
On September 10, 2020, the U.S. District Court for the Southern District of New York entered a final judgement against asset manager John Geraci in connection with his misappropriation of approximately $1 million of his clients' funds.
The SEC's complaint, filed on July 17, 2018, alleged that Geraci formed the Meridian Matrix Long Short Equity Fund, LP in 2015, and hired Nicholas Mitsakos and his company, Matrix Capital Markets, LLC as the fund's portfolio manager. According to the complaint, 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, Geraci allegedly used Mitsakos' false and unsubstantiated claims to market his fund, and eventually obtained $2 million from investors. The complaint alleged that Geraci later learned of Mitsakos' deception and his misappropriation of nearly $800,000 of investors' funds, but continued to market the fund and to let Mitsakos trade the clients' assets. The complaint also alleges that, after Mitsakos returned approximately $1 million of the funds, Geraci then misappropriated the funds for his own use, telling his clients that Mitsakos had lost all of it.
The final judgment enjoins Geraci from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The judgment also orders Geraci to pay disgorgement of $1,098,971, plus prejudgment interest of $229,740, which was deemed satisfied by a restitution and forfeiture order in a parallel criminal action. The judgment also imposes an officer and director bar against Geraci, who also agreed to a lifetime bar from the securities industry in a parallel SEC administrative proceeding.
The SEC's litigation was led by Alison R. Levine, Kevin P. McGrath, and Thomas P. Smith, Jr. and was supervised by Lara S. Mehraban of the SEC's New York Regional Office. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service.