U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23532 / May 5, 2016
Securities and Exchange Commission v. James R. Trolice, Lee P. Vaccaro, and Patrick G. Mackaronis, Civil Action No. 16-CV-02513 (United States District Court for the District of New Jersey, filed May 4, 2016)
The Securities and Exchange Commission yesterday charged two men with pocketing investor money they raised for limited liability companies they owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company.
The SEC alleges that James R. Trolice and Lee P. Vaccaro raised approximately $6 million from more than 100 investors by creating a false sense of urgency and exclusivity around the offering, claiming that only a limited amount of warrants were available and that they eventually could be exercised at a very profitable price. Trolice further lured investors by showcasing his apparent wealth and hosting elaborate investor parties at his multi-million-dollar home. He also touted his purported track record of bringing startup companies public and obtaining high returns for investors.
Meanwhile, Trolice allegedly used investor funds to pay his mortgage along with other bills for a credit card, car lease, college tuition, and landscaping. Vaccaro allegedly spent at least a quarter-million dollars in investor funds at Las Vegas casinos.
The SEC further alleges that neither Trolice nor Vaccaro was registered with the SEC or any state regulator. Investors can quickly and easily check whether people selling investments are registered by using the SEC's investor.gov website.
The SEC's complaint, filed yesterday in federal court in Newark, N.J., also charges former stockbroker Patrick G. Mackaronis, who received commissions for bringing prospective investors to Trolice and Vaccaro so they could close the sales. Mackaronis ignored fraud risks and blindly touted the opportunity to family members, friends, and brokerage clients while knowing very little about the investments themselves. Mackaronis has agreed to settle the SEC's charges by disgorging the $85,000 in commissions he received plus paying $8,486.91 in interest and a $50,000 penalty. Mackaronis also agreed to a three-year bar from the securities industry. The settlement is subject to court approval.
In parallel actions, the U.S. Attorney's Office for the District of New Jersey yesterday announced criminal charges against Vaccaro, and the New Jersey Bureau of Securities announced civil charges against Trolice, Vaccaro, and Mackaronis.
The SEC's complaint charges: (i) Trolice and Vaccaro with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, or, in the alternative, Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act, for aiding and abetting each other's violations of Sections 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (ii) Vaccaro with violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940; and (iii) Mackaronis with violations of Sections 5(a), 5(c), and 17(a)(3) of the Securities Act, and Section 15(a) of the Exchange Act.
The SEC's continuing investigation is being conducted by Kristin M. Pauley, Ann Marie Preissler, James E. Burt IV, James Flynn, Jacqueline A. Fine, Leslie Kazon, and Sheldon L. Pollock in the SEC's New York office. The litigation will be led by Kevin McGrath and Ms. Pauley. The case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey and the New Jersey Bureau of Securities.