SEC Obtains Final Judgment Against Hedge Fund Manager Charged with Defrauding Clients

Litigation Release No. 24749 / February 27, 2020

SEC v. Nicholas Lattanzio et al., 2:15-cv-03883 (D.N.J.)

The Securities and Exchange Commission obtained a final judgment against defendant Nicholas Lattanzio, a self-proclaimed New Jersey hedge fund manager, and the entities through which Lattanzio defrauded two small businesses out of approximately $4 million.

According to the SEC's complaint, filed on June 10, 2015, Lattanzio posed as a hedge fund manager and falsely promised small businesses that he would arrange project financing for them in exchange for an investment in his Black Diamond Capital Appreciation Fund (BD Fund). Lattanzio falsely represented that the BD Fund had as much as $800 million under management and a proven track record of producing double-digit returns. In reality, the fund never had more than approximately $5 million in assets and Lattanzio simply stole funds to finance lavish personal expenses for himself and his family, including a luxury automobile, expensive jewelry, a home in an affluent neighborhood, and private school tuition.

In a parallel criminal matter, Lattanzio was convicted at trial on two counts of securities fraud and two counts of wire fraud, was sentenced to 72 months in prison and ordered to pay restitution in the amount of 3,929,600 to the victims of his fraud.

To resolve the SEC's allegations, Lattanzio, the BD Fund, and three other Lattanzio-controlled entities each consented to the entry of a final judgment, enjoining them from future violations of 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, and, with respect to Lattanzio and certain of the entities, Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940. The judgment orders Lattanzio and the other defendants to pay disgorgement of $3,929,600, deemed satisfied by the restitution order against him in the criminal case. In a separate administrative proceeding, Lattanzio also consented to a permanent associational bar.

The SEC's investigation was conducted by David Austin and George Stepaniuk of the SEC's New York office, and the litigation was led by Todd Brody. The case was supervised by Sanjay Wadhwa. The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, and the New Jersey Bureau of Securities within the State Attorney General's Division of Consumer Affairs.