I have come across so many people who are professional “capital raisers” or people who find startups with investor funds and then get a commission from the company depending on how much they bring in.  When you go to FINRA’s BrokerCheck website, you realize that they aren’t actually licensed brokers but illegal finders.  A few times I have counseled my “finder” friends to go and take the exams and get licensed, and surprise, surprise, the licensing process wasn’t that hard.

 

SEC Charges Unregistered Brokers with Pocketing Investor Money

FOR IMMEDIATE RELEASE
2016-82

Washington D.C., May 4, 2016 —The Securities and Exchange Commission today charged two men with pocketing investor money they raised for limited liability companies they owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company.

The SEC alleges that James R. Trolice and Lee P. Vaccaro raised approximately $6 million from more than 100 investors by creating a false sense of urgency and exclusivity around the offering, claiming that only a limited amount of warrants were available and that they eventually could be exercised at a very profitable price. Trolice further lured investors by showcasing his apparent wealth and hosting elaborate investor parties at his multi-million-dollar home. He also touted his purported track record of bringing startup companies public and obtaining high returns for investors.
Meanwhile, Trolice allegedly used investor funds to pay his mortgage along with other bills for a credit card, car lease, college tuition, and landscaping. Vaccaro allegedly spent at least a quarter-million dollars in investor funds at Las Vegas casinos.
The SEC further alleges that neither Trolice nor Vaccaro was registered with the SEC or any state regulator.  Investors can quickly and easily check whether people selling investments are registered by using the SEC’s investor.gov website.
“We allege that Trolice and Vaccaro lied to investors about the nature of the investment, created a phony aura of success, and ultimately funded their own lifestyles rather than investing all the money as promised,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “The SEC continues to pursue and investors should continue to be aware of unregistered brokers selling investments.”
The SEC’s complaint, filed today in federal court in Newark, N.J., also charges former stockbroker Patrick G. Mackaronis, who received commissions for bringing prospective investors to Trolice and Vaccaro so they could close the sales. Mackaronis ignored fraud risks and blindly touted the opportunity to family members, friends, and brokerage clients while knowing very little about the investments themselves. Mackaronis has agreed to settle the SEC’s charges by disgorging the $85,000 in commissions he received plus paying $8,486.91 in interest and a $50,000 penalty. Mackaronis also agreed to a three-year bar from the securities industry. The settlement is subject to court approval.
In parallel actions, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Vaccaro, and the New Jersey Bureau of Securities announced civil charges against Trolice, Vaccaro, and Mackaronis.
The SEC’s complaint charges Trolice and Vaccaro with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Vaccaro is additionally charged with violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
The SEC’s continuing investigation has been conducted by Kristin M. Pauley, Ann Marie Preissler, James E. Burt IV, James Flynn, Jacqueline A. Fine, Leslie Kazon, and Sheldon L. Pollock in the New York office. The litigation will be led by Kevin McGrath and Ms. Pauley.  The case is being supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey and the New Jersey Bureau of Securities.
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