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 more than $1 million to settle litigation brought by Varacchi’s prior employer.
“As alleged in our complaint, Varacchi promised investors that their money would be routed to up-and-coming hedge fund managers when in reality he was diverting significant portions for personal use and unauthorized business expenses,” said Anthony S. Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.
The SEC’s complaint seeks disgorgement and penalties against Varacchi and Sentinel Growth Fund Management. The complaint also names two hedge funds as relief defendants for the purposes of recovering investor assets in their possession.
The SEC’s investigation, which is continuing, is being conducted by the Asset Management Unit and the Boston Regional Office, including Robert Baker, Cynthia Baran, Trevor Donelan, Michael Moran, and Naomi Sevilla. The SEC’s litigation will be led by Martin Healey, Mr. Baker, and Mr. Moran.
Sentinel Growth Fund Management was not registered with the SEC or any state to do business as an investment adviser. Investors can quickly and easily check the SEC’s investor.gov website before they invest to determine whether people selling them investments are properly registered.