U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23742 / February 6, 2017
Securities and Exchange Commission v. Mark J. Varacchi, et al., Civil Action No. 3:17-cv-00155 (United States District Court for the District of Connecticut, filed February 2, 2017)
Court Orders Asset Freeze and Other Injunctive Relief In Ponzi Scheme
The Securities and Exchange Commission announced that on February 3, 2017, it obtained an asset freeze and other preliminary injunctive relief against Sentinel Growth Fund Management, LLC and its founder Mark J. Varacchi, as well as two hedge funds managed by Sentinel and Varacchi.
The preliminary injunction and order freezing assets restrains defendants Sentinel and Varacchi from violating certain antifraud provisions of the federal securities laws, orders that the defendants' and hedge funds' assets be frozen, and prohibits Sentinel and Varacchi from accepting or depositing any additional investor funds.
The SEC's complaint, filed on February 2, 2017 in federal court in Connecticut, alleges that Sentinel and 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, Sentinel and Varacchi 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 complaint charges Sentinel and Varacchi with violating Section 17(a) of the Securities Act, Section 10(b) of the 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 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, which is continuing, was 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 is being handled by Martin Healey of the Boston Regional Office, Mr. Baker, and Mr. Moran.