Ex-Wirehouse Rep Charged With Ponzi Scheme
The SEC has accused a former wirehouse rep of running a Ponzi scheme that cost at least 42 investors more than $15 million in losses, the regulator says in a letter of complaint.
Michael Scronic, who was a registered representative associated with Morgan Stanley from 1998 to 2005, allegedly began raising money in 2010 from friends and acquaintances for an options trading strategy in a fictitious hedge fund, according to the SEC. From April 2010 through August 2017, 88% of the net investor deposits withered away, losing money in 79 out of 89 months, the regulator claims.
Scronic allegedly emailed investors quarterly statements showing the hedge fund growing quarterly at about 4.8%, although one investor received a statement claiming 10.7% quarterly growth, the SEC says.
When Scronic couldn’t come up with the money to meet redemption requests, he paid back investors with new money raised from new or existing investors and came up with a string of excuses to avoid the redemptions, according to the complaint. The regulator is seeking an injunction, disgorgement and penalties against Scronic, who currently isn’t registered with any firm, according to the complaint.
Separately, the SEC has charged Tarek Bahgat with defrauding seven of his advice clients, including senior citizens, out of $378,000.
Bahgat, a former resident of Williamsville, N.Y., who now lives in Egypt, also allegedly impersonated clients to transfer funds from broker-dealers who held its accounts to himself or to WealthCFO LLC, a company he controlled, according to the SEC’s suit. The regulator also alleges Lauramarie Colangelo, the company’s operations manager, aided in the scheme. The SEC is seeking injunctions and civil penalties from Bahgat and Colangelo.
Bahgat had started in the financial services industry in 1986 and was since affiliated with over a dozen different firms, including Summit Brokerage Services, Wachovia Securities and Securities America, according to his BrokerCheck profile. He has four other disclosures, starting with a 2001 customer dispute alleging unsuitable mutual fund purchases that resulted in a $9,215 settlement.