Private Fund Manager Charged by SEC for Theft of Investor Funds
When it comes to investing, it is paramount that investors are able to trust their investment advisor. Often when someone chooses an investment advisor, their selection is often based upon advertising saturation, word-of-mouth, or a referral from a friend. A referral from a friend is probably a great way to select an advisor because the friend probably has knowledge of the advisor’s level of trustworthiness. Sadly, a recent Securities and Exchange Commission (SEC) charge leveled against private security fund manager, Gaeton Della Penna of Sarasota, Florida, was the result of one such trusted advisor who preyed upon several personal acquaintances that he knew from his church.
According to the complaint filed by the SEC, Della Penna created and managed three Florida limited liabilities companies, A-G Hedge Group, LLC; The Contrarian Fund, LLC; and The New Economy Fund, LLC, collectively referred to in the SEC complaint as the “Funds.” The complaint alleges that from 2008 until 2013, Della Penna used these three private investment funds to raise $3.8 million by telling investors that their investments would be invested into small companies or traded in securities. He made claims that these investments would realize a 5% annual return along with 80% trading profits. To other investors, he pledged a 10% return on the funds that he claimed to be investing in small companies.
Although Della Penna represented himself to be a savvy trader who consistently garnered profits for his investors, his inability to invest successfully on behalf of his clients resulted in him losing most of the monies with which he had been entrusted. To further exacerbate the losses of his clients, he siphoned off $1.1 million of the money he had gleaned from them and used it for personal gain. He made mortgage payments on his 10,000 square foot home and even gave some of the stolen money to his girlfriend, with whom he lived.
When his fraudulent activities began to come undone, he created a Ponzi scheme by targeting new investors to raise funds to give to previous investors under the guise of returns on their earlier investments. He even went so far as to distribute fake account statements to give to some investors in an attempt to back up his assertions that the investments he made for them were profitable.
“Della Penna lied to investors about his trading track record in order to gain their trust and pocket their investments,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “He fostered a false sense of security by creating bogus account statements showing positive returns when, in reality, he was operating a Ponzi scheme and stealing investor money.”
In 2000, Della Penna formed Gaeton Capital Advisors, LLC. The SEC has named this company as a relief defendant because in addition to his making mortgage payments and payments to his girlfriend, he also funneled investor monies into Gaeton Capital.
The SEC is seeking the surrender of the illegally obtained profits, pre-judgment interest, other financial penalties, and a permanent injunction against Della Penna to prevent him from committing any further such violations. Additionally the U.S. Attorney’s Office for the Middle District of Florida has filed criminal charges against him.
Blum Law Group represents clients who have been victimized by brokers or investment firms. If you feel that you have suffered financial losses due to the acts of fraud committed by Mr. Della Penna, please call us at the Blum Law Group for a free consultation at 877-STOCK-LAW.
(Sources: SEC press release; SEC complaint)