Mark J. Varacchi may have to return $3.95 million his firm allegedly stole from investors.
A federal court in Connecticut has entered a judgment against adviser Mark J. Varacchi and his firm, Sentinel Growth Fund Management, for allegedly stealing $3.95 million of investor assets in a hedge fund Ponzi scheme.
The court also entered judgment against two hedge funds — Radar Alternative Fund and Radar Alternative Master Fund SPC — managed by Sentinel and Mr. Varacchi. Separately, the court entered an order appointing a receiver to oversee assets of Sentinel and the Radar Funds.
Depending on actions by the Securities and Exchange Commission, the court may order disgorgement and prejudgment interest against Sentinel, Mr. Varacchi or the Radar Funds, or civil penalties against Sentinel or Mr. Varacchi, the SEC said in a release.
On Feb. 1, Mr. Varacchi pleaded guilty to securities fraud, wire fraud and conspiracy to commit securities fraud and wire fraud. The criminal information charged him with conduct overlapping with the allegations in the SEC's complaint. In consenting to the judgment, Sentinel, Mr. Varacchi and the Radar Funds acknowledged the guilty plea by Mr. Varacchi, who has been barred from the securities industry.
The SEC's complaint, filed on Feb. 2, alleged that Sentinel and Mr. Varacchi misrepresented to investors that money they deposited with the firm would be allocated to up-and-coming hedge fund managers for investment purposes. According to the SEC's complaint, the adviser and his firm did not transfer all the money as promised, "instead commingling investor assets and manipulating account activity, account balances, and investment returns as part of a scheme to siphon away investor funds."
On Feb. 3, the SEC obtained an asset freeze and other preliminary relief against Sentinel, Mr. Varacchi, and the Radar Funds.
