The SEC has charged an alleged investment adviser in New York for defrauding investors.
It alleges Stephen A. Colangelo, Jr. repeatedly misled investors while raising $3 million in investments for four start-up companies he created. He allegedly also persuaded three other investors to let him act as their investment adviser, and they gave him more than $1 million to invest in the markets on their behalf.
The SEC claims Colangelo also boasted a phony professional and educational background, and that he hid his past criminal activities from potential investors by saying he historically achieved extremely high returns.
It says Colangelo siphoned off at least $1 million in investor funds to pay such unauthorized personal expenses as his federal income taxes, illegal narcotics, gambling, cigars, and travel for him and his family.
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According to the SEC’s complaint filed in the U.S. District Court for the Southern District of New York, Colangelo’s fraudulent scheme began in 2009 when he induced investors to invest more than $750,000 in the Brickell Fund, a pooled investment vehicle that he created, advised, and controlled. In March 2009, regulators say he sent numerous e-mails to potential investors boasting phony information.
The SEC also alleges that after spending or losing all of the money invested in the Brickell Fund, Colangelo continued to fraudulently raise funds from investors for three other startup businesses he created; Hedge Community, Start a Hedge Fund, and Under the Radar SEO.
According to the SEC’s complaint, Colangelo even created a profile on LinkedIn where he falsely stated he’d studied finance at Nyack College. He provided a link to his profile to potential and existing investors.
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In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Colangelo.
“Colangelo used blatantly false claims of investment success to lure investors to pour a substantial portion of their life savings into his numerous business and investment schemes,” says Andrew M. Calamari, director of the SEC’s New York Regional Office.
The SEC’s complaint charges Colangelo with violations of the anti-fraud provisions of the federal securities laws, and seeks permanent injunctions, financial penalties, and disgorgement of ill-gotten gains plus prejudgment interest.
The SEC’s investigation was conducted in the New York Regional Office by Senior Attorney Christina McGill and Assistant Regional Director Wendy B. Tepperman. The SEC’s litigation will be led by Senior Trial Counsel Kevin McGrath.
Read the SEC complaint.
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