Investor Lawyers Blog
The U.S. Securities and Exchange Commission (“SEC”) has alleged that unregistered investment adviser John A. Masanotti, Jr. (“Masanotti”) of Darien, Connecticut and his company, Middlesex Mortgage Group LLC (“MMG”), violated federal law in connection with investments that MMG induced from outside investors, totaling least $5.9 million, beginning in 2016. Many of the MMG investors allegedly liquidated securities they held in retirement accounts to invest in the fund.
The SEC Complaint is accessible here. SEC Complaint
According to the SEC. MMG and Masanotti allegedly used investor money to make Ponzi-like payments to investors and also used some investor funds for Masanotti’s “extravagant personal expenses.”
According to the SEC, Masanotti told investors that MMG would invest their money in foreign currencies, securities and initial public offerings, but in fact MMG appears to have made no investments on their behalf. After receiving their initial payments, Masanotti continued to deceive investors to perpetuate the investment scheme, including via payments that purported to be returns on capital invested, the SEC said.
Over the course of the scheme, Masanotti allegedly used more than $3 million of Middlesex’s assets for his and his family’s personal benefit, according to the SEC suit. The SEC accuses Masanotti of violating the Securities Act and the Exchange Act.
A Ponzi scheme is a purported investment vehicle in which early investors in the scheme are paid funds from later investors, thus creating the illusion of legitimacy and solvency. Ponzi schemes are often doomed to failure once the perpetrator of the scheme can no longer pay out investors through newly raised money. Some warning signs that every investor should remain mindful of when vetting a potential investment and conducting due diligence include the promise of high returns with guarantees of little or no risk; overly consistent returns with little or no volatility in the investment; marketing through friends and family or through an affinity group such as a church, workplace or community organization; unregistered investments; and am unlicensed seller or promoter. While legitimate broker-dealers and investment advisors sometimes sell investments that turn out to be Ponzis, wittingly or unwittingly, frequently unlicensed sales agents are involved.
Investors with questions about claims about non-conventional investments or concerns that they may have invested in a fraudulent scheme may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).