U.S. Securities and Exchange Commission
Litigation Release No. 18601 / February 27, 2004
SEC OBTAINS ASSET LIQUIDATION AND DISGORGEMENT ORDER AGAINST EQUITY FUND AND ITS PRINCIPAL, FRANKLIN S. MARONE, AND ASSET FREEZE AGAINST RELIEF DEFENDANT MARITA R. MARONEDefendants Patrollers Capital Fund and Franklin S. Marone and Relief Defendant Marita R. Marone
SECURITIES AND EXCHANGE COMMISSION v. DEFENDANTS PATROLLERS CAPITAL FUND AND FRANKLIN S. MARONE AND RELIEF DEFENDANT MARITA R. MARONE, 04 Civ. 01227 (NRB) (S.D.N.Y., filed February 13, 2003)
On February 27, 2004, in SEC v. Marone, et al., 04 Civ. 01227 (S.D.N.Y.), United States District Court Judge Naomi R. Buchwald issued a partial final judgment ordering defendant Franklin S. Marone to liquidate his assets and disgorge all money that Marone is alleged to have obtained fraudulently from dozens of investors through a phony equity fund scheme that Marone began in 1999. Marone consented to the judgment after the Securities and Exchange Commission last week filed a complaint against him and obtained an emergency order from Judge Buchwald freezing Marone's assets. Marone neither admits nor denies the Commission's fraud allegations. The judgment also enjoins Marone from future violations of the federal securities laws and orders Marone to pay a civil money penalty. The full amount of Marone's disgorgement and penalty are to be determined by the Court at a future date. The Commission's complaint alleges that Marone defrauded investors out of more than $3.2 million. In a February 9, 2004, written statement to law enforcement authorities, Marone admitted to defrauding investors out of at least $1.9 million. Judge Buchwald issued a similar consent judgment against Marone's purported equity funds, defendants Patrollers Capital Fund and its related funds, Patrollers Capital Fund I, II, III, The Wedel Fund and The Whistler Fund.
Judge Buchwald also issued a consent order freezing the assets of Marone's wife, relief defendant Marita Marone, pending resolution of the action . The Commission does not charge Mrs. Marone with securities fraud, but alleges that both Mr. and Mrs. Marone used investor funds from the fraud for their personal use.
The SEC's complaint, filed February 13, 2004, alleges that, between January 1999 and January 2004, Marone fraudulently obtained over $3.2 million from dozens of investors by inducing them to invest in several fictitious "equity funds" that Marone purported to manage. According to the Commission's complaint, Marone falsely promised investors extraordinary returns at virtually no risk and sent investors falsified account statements reporting the current value of their investments. In reality, the complaint alleges, Marone never invested his victims' money. Instead, he used investor funds to support a lavish lifestyle. Among other assets ordered to be liquidated by Marone are two homes, cars, boats, jet-skis, snowmobiles, and other luxury items.
The litigation is pending.
See also Litigation Release No. 18581 (February 18, 2004).