Federal regulators sued the head of an Atlanta money management firm, alleging it used a Ponzi-like scheme to cover up $17 million in losses affecting about 200 clients in a trio of private investment funds.
The Securities Exchange Commission said Wednesday that it is seeking an emergency court order freezing the assets of Angelo A. Alleca and his firm, Atlanta-based Summit Wealth Management, who face civil charges of securities and investment management fraud.
The SEC filed the complaint Tuesday in U.S. District Court in Atlanta.
The SEC said it was told that Summit Wealth Management oversees about $500 million in more than 2,200 client accounts. But the alleged fraud appears to be limited to a so-called “fund of funds” launched in 2004 and two hedge funds that Alleca created later, according to the SEC.
“We haven’t alleged anything with regard to the rest of the accounts,” said William Hicks, associate director of the SEC’s Atlanta regional office.
Neither Alleca nor his attorney could be reached for comment. According to Summit Wealth Management’s website, the firm has at least 25 employees in four offices in Atlanta, Chicago, San Antonio and Beverly Hills, Calif. The company manages trusts and provides investment management and financial planning services.
Alleca, 42, has homes in Atlanta and Buffalo, N.Y., the SEC said.
On Monday, Jace Brooks, a financial planner at Summit Wealth Management, was sworn in as a Gwinnett County commissioner, replacing former commissioner Shirley Lasseter, who pleaded guilty to a bribery charge. Brooks is not named in the SEC’s complaint.
“I’m furious about [the alleged fraud],” said Brooks, who heard of the SEC’s complaint Wednesday afternoon. “… It’s not something I want to be a part of, by any stretch.” He said none of his clients had invested in the funds named in the SEC’s complaint.
Brooks, 43, who joined the firm last year, said neither he and nor, as far as he knows, anyone else at the firm except Alleca were involved in the alleged fraud. But the SEC has asked the court to appoint a receiver to oversee the firm and Brooks said he was waiting to hear from the company’s attorney to know what he could tell his clients.
“I’m very frustrated with it,” he said. “We’re hoping someone will show up tomorrow to tell us something.”
According to the SEC’s complaint, Alleca had created Summit Investment Fund LP, a fund of funds, as a way to allow investors — typically wealthy individuals — to invest in several other private investment funds to minimize their risks.
However, the SEC said Alleca “incurred substantial losses” after he started directly trading securities in 2006. But rather than reporting the losses, the agency said, Alleca hid the losses with false account statements. He also created two more private investment funds, Private Credit Opportunities Fund LLC and Asset Diversification Fund LP, to pay back earlier clients, but lost “virtually all” of the money in those funds, too, the SEC said.
“SEC examiners and attorneys acted swiftly after receiving a tip about possible wrongdoing at the firm, and have mounted an aggressive effort to put a stop to Alleca’s fraud before more investors are harmed,” said Hicks.
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