Investing

SEC Charges Unregistered Brokers With Pocketing Money in Startup Scheme

Chris Lange

Published: May 4, 2016 12:45 pm

Last Updated: January 13, 2020 9:52 am

The U.S. Securities and Exchange Commission (SEC) recently charged two men with pocketing investor money. These funds were raised for limited liability companies that these men owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company.

The agency alleged in its complaint that James R. Trolice and Lee P. Vaccaro raised roughly $6 million from more than 100 investors by creating a false sense of urgency and exclusivity surrounding the offering, claiming that only a limited amount of warrants were available and that they eventually could be exercised at a very profitable price.

Trolice further lured investors by showcasing his apparent wealth and hosting elaborate investor parties at his multi-million-dollar home. He also touted his purported track record of bringing startup companies public and obtaining high returns for investors.

At the same time, Trolice allegedly used investor funds to pay his mortgage, along with other bills for a credit card, car lease, college tuition and landscaping. Vaccaro allegedly spent at least a quarter-million dollars in investor funds at Las Vegas casinos.

The SEC further alleges that neither Trolice nor Vaccaro was registered with the SEC or any state regulator.  Investors can quickly and easily check whether people selling investments are registered by using the SEC’s website.

Andrew M. Calamari, director of the SEC’s New York Regional Office, commented:

We allege that Trolice and Vaccaro lied to investors about the nature of the investment, created a phony aura of success, and ultimately funded their own lifestyles rather than investing all the money as promised. The SEC continues to pursue and investors should continue to be aware of unregistered brokers selling investments.

The complaint also charges former stockbroker Patrick G. Mackaronis, who received commissions for bringing prospective investors to Trolice and Vaccaro so they could close the sales. Mackaronis ignored fraud risks and blindly touted the opportunity to family members, friends and brokerage clients while knowing very little about the investments themselves. Mackaronis has agreed to settle the SEC’s charges by disgorging the $85,000 in commissions he received plus paying $8,486.91 in interest and a $50,000 penalty.

In parallel actions, the U.S. Attorney’s Office for the District of New Jersey has announced criminal charges against Vaccaro, and the New Jersey Bureau of Securities announced civil charges against Trolice, Vaccaro and Mackaronis.