$102M Ponzi scheme funded luxury cars, Las Vegas party: SEC
A group of formerly registered advisors set up a $102 million Ponzi scheme that defrauded more than 600 investors nationwide and paid for luxury cars, houses across the country and an extravagant party at a Las Vegas nightclub, says the SEC.
Perry Santillo, Christopher Parris, Paul LaRocco, John Piccarreto and Thomas Brenner, along with the three investment firms associated with the men, have been charged with securities fraud violations in a federal court in Manhattan. The court also granted the SEC’s request for an asset freeze and a temporary restraining order.
The alleged scheme started with Santillo and Parris buying or taking over the books of business of retiring investment professionals, the regulator says. Then the pair, or local sales people — including Piccarreto, LaRocco and Brenner — persuaded the newly acquired clients to take retirement savings out of traditional investment vehicles and invest it in products owned by the men or their associated firms, including First Nationle, Percipience and United RL, court documents show.
Santillo was barred in Maryland over related allegations. He purchased one firm after its owner was barred from the industry and began soliciting its clients, promising face-to-face meetings, according to the Maryland court order. Santillo wrote a letter to clients in January saying the firm, “underwent an extensive and time consuming search to find a financial advisor who will be able to seamlessly replicate and enhance the care and dedication that [the former firm] provided you with in the past,” according to the complaint.
The SEC alleges the men knew that the scheme was a fraud and they were stealing the funds from their clients. For example in February 2015, Piccarreto invested $250,000 from an 80-year-old client with dementia, court documents show. Two years later, his daughter began to worry about the safety of the investment. “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to that money,” Piccarreto allegedly wrote in an email at the time. This investor has not received any money back, say the SEC.
The men spent at least $20 million on themselves and paid $38.5 million in Ponzi-like payments, says the regulator.
In another example, LaRocca persuaded one investor — whose late father had already invested $510,000 in First Nationle — to not only keep the funds with the firm but to invest an additional $450,000 of her own money into United RL to fund medical laboratories, court documents show. The investor has received payments $89,000 in return, the SEC says.
“We allege that the defendants engaged in a massive fraud and swindled investors to line their pockets with ill-gotten gains,” said Marc Berger, director of the SEC’s New York office. “Investors should be on high alert whenever they are promised guaranteed returns.”
United RL offered promissory notes with maturity dates of either one year or three years that claimed 7% interest payments to be paid semi-annually and claimed bonus payments of 7% on the three-year notes, to be credited to the investor upon initially investing, the SEC says.
According to court documents, Santillo misappropriated at least $13.4 million; Parris at least $1.1 million; LaRocco at least $1.1 million; Piccarreto, at least $1.3 million; and Brenner at least $2.9 million.
As for where the money went, Santillo allegedly funded a party at a Las Vegas nightclub where he commissioned a song to be played about himself with the lyrics: “pop champagne in L.A., New York to Florida; buy another bottle just to spay it all over ya,” says the SEC. The song referred to Santillo as “King Perry” and his attire as a “ten-thousand dollar suit everywhere he rides,” says the regulator.
All the men have been previously registered with FINRA, most recently, Brenner who was barred in 2017, per the SEC complaint.
None of the men could be reached for immediate comment. Legal counsel was not listed in the court documents.