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Home > Blog > SEC Charges Atlanta-Based Adviser with Operating Ponzi-Like Scheme Involving Private Investment Funds

SEC Charges Atlanta-Based Adviser with Operating Ponzi-Like Scheme Involving Private Investment Funds

The Securities and Exchange Commission (SEC) is seeking a court emergency order to freeze the assets of the Atlanta-based investment advisory firm Summit Wealth Management and its principal, Angelo Alleca, for running a Ponzi-like scheme that cost investors some $17 million.

The SEC says Alleca defrauded investors in what it describes as a purported fund-of-funds strategy that tried to hide trading losses by creating new private funds to make money to pay back the original fund investors.

“Alleca told Summit Wealth clients that he was investing their money in funds, but instead he was rolling the dice in the stock market without success,” said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit.  “Rather than fess up about his trading losses, Alleca tried a cover up by creating new funds. Instead of winning back the money, he just compounded his fraud by suffering further losses.”

According to the SEC’s complaint filed Sept. 19 in an Atlantafederal court, Alleca and Summit Wealth Management offered and sold interests in Summit Fund, which they told clients was operating as a fund-of-funds. Clients thought Alleca andSummitwere investing their money in other funds and investment products rather than directly in stocks and other securities. The fund-of-funds investment strategy is intended to diversify investor money and minimize exposure to risks.

Instead of engaging in active securities trading with his clients’ money, however, Alleca incurred substantial losses. He subsequently concealed the Summit Fund trading losses from investors and provided them with false account statements, the SEC says.

When it came time to meet redemption requests from Summit Fund investors, the SEC alleges that Alleca created at least two hedge funds to raise money from Summit Wealth clients – the Private Credit Opportunities Fund LLC and Asset Class Diversification Fund LP. Alleca’s plan was to cover up the losses that he had incurred in Summit Fund by illegally transferring profits from the new funds in a Ponzi-like fashion in order to meet earlier redemption requests.

Alleca’s plan backfired when those successive funds incurred further trading losses. Meanwhile, Alleca continued to issue false account statements to investors in Summit Fund, as well as the additional funds in order to hide the actual losses on their investments.

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