The Securities and Exchange Commission is charging Nicholas Lattanzio with hedge fund fraud. The New Jersey man is accused of pretending to be a hedge fund manager and bilking small companies out of over $4 million.
According to the regulator, Lattanzio falsely promised small businesses that he would organize project financing for them and bring in healthy returns on money they invested in his Black Diamond Capital Appreciation Fund. He purportedly told them that they could take their money out of the project if the financing didn’t happen. He also allegedly claimed that the fund had up to $800 million under management and a history of generating double-digit returns.
The SEC, however, says that the fund never held anything above $5 million in assets and that Lattanzio took investors’ money for his own spending, including the purchase of an expensive home, a luxury car, merchandise from Tiffany & Co., over $760K in credit card debt, private school tuition for his children, and other expenses.
According to the SEC’s complaint two of Lattanzio’s victims were small companies seeking capital to finance their business. Lattanzio purportedly told them directly and through representatives that the companies would be able to get capital through a lending facility as long they invested a percentage of the capital that they wanted with Black Diamond first.
Both companies invested about $2 million each but neither ever received financing. Even though they were supposed to be able take their money out of the fund if the financing didn’t happen within a specific time period, the two companies never received any back even after they asked numerous times.
Meantime, the U.S. Attorney’s Office for the District of New Jersey has filed a parallel action against Lattanzio for criminal charges. On Wednesday, the U.S. Department of Justice charged him with two counts of securities fraud and three counts of wire fraud. He was also arrested. The New Jersey Bureau of Securities announced sanctions against Lattanzio, ordering him and co-defendant Pasquale Montesani to pay a $2.5 million fine.
Unfortunately, high-net worth individual investors and institutional investors can get bilked. The SSEK Partners Group is dedicated to helping investors get back their securities fraud losses.
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SEC Complaint (PDF)