U.S. Securities and Exchange Commission
Litigation Release No. 23739 / February 2, 2017
Securities and Exchange Commission v. Varacchi, et al., Civil Action No. 3:17-cv-00155 (D. Conn., filed February 2, 2017)
SEC Charges Investment Adviser For Stealing Investor Funds and Operating a Ponzi Scheme
The Securities and Exchange Commission today charged a Connecticut-based investment advisory business and its owner with stealing money from investors to settle a private lawsuit among other misuses.
The SEC alleges that Sentinel Growth Fund Management and its founder Mark J. Varacchi misrepresented to investors that money they deposited with the firm would be allocated to up-and-coming hedge fund managers for investment purposes. According to the SEC's complaint, Varacchi and Sentinel Growth Fund Management did not transfer all the money as promised, instead commingling investor assets and manipulating account activity, account balances, and investment returns as part of a scheme to siphon away investor funds. Varacchi and his firm allegedly stole at least $3.95 million from investors, including over $1 million to settle litigation brought by Varacchi's prior employer.
The SEC's complaint, filed in U.S. District Court for the District of Connecticut, charges Sentinel and Varacchi with violating Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8. The complaint seeks injunctive relief, disgorgement of ill-gotten monetary gains, plus interest and penalties. The SEC's complaint also names as relief defendants two hedge funds, Radar Alternative Fund LP and Radar Alternative Master Fund SPC, which Sentinel and Varacchi managed and that hold investor assets.
The SEC's investigation is being conducted jointly by staff of the Asset Management Unit and the SEC's Boston Regional Office, including Robert Baker, Cynthia Baran, Trevor Donelan, Michael Moran, and Naomi Sevilla. The litigation will be handled by Martin Healey of the Boston Regional Office, Mr. Baker, and Mr. Moran.