The Commission filed an unusual investment fund fraud
action in SEC v. Chiaese, Civil Action No. 10-cv-5110 (D.N.J. Filed Oct.
5, 2010). In what is now the new staple of SEC enforcement, the typical case
alleges that the individual defendants and their related entities raised funds
from a number of individuals. False claims of easy, quick, large and safe
profits are made. Account statements are furnished detailing the success of the
investment scheme and the judgment of the investor. It turns out much of the
money is gone, the statements were false and the promoters are living large.
The SEC and sometimes DOJ wind up the operation, salvaging for investors what
The complaint in Chiaese has some of the usual
allegations. It differs from most, however, because it is built on a series of
stories from individual investors who furnished their money to the defendants.
Absent are the usual "get-rich-quick" misrepresentations. In their place were
claims that funds would be invested in accord with investor directives.
Investors were, however, furnished with the usual statements verifying their
The defendants in this scam are Carlo G. Chiaese, a
registered representative associated with a broker dealer. Defendant Micol
Chiaese is Carlo's wife. C.G.C. Advisors, LLC is an entity controlled by the
individual defendants. The complaint chronicles the investment efforts of six
clients identified with various abbreviations. For example:
Overall at least $2.5 million was invested by the six
clients with the defendants. While the complaint is different from those in
many of these cases, the end is the same. The statements were false, according
to the SEC. The money was misappropriated and used by the individual defendants
to enhance their life style.
The SEC complaint alleges violations of Securities Act
Section 17(a), Exchange Act Section 10(b) and Sections 206(1) and 206(2) of the
Investment Advisers Act. The Commission sought emergency relief to freeze the
assets. As the complaint makes clear by detailing the lavish life style of the
individual defendants, much of the cash is gone. The case is in litigation. See
also Litig. Rel 21684 (Oct. 5, 2010).
Program: Fifth Annual
Securities Fraud National Institute, October 7-8, 2010 in New Orleans. For
further information on this excellent program please click here: http://www.abanet.org/cle/programs/securitiesfraud/
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developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.