The Securities and Exchange Commission has barred former Morgan Stanley broker Michael Scronic for his role in running a Ponzi-like scheme and raising money from retail investors for a fictitious hedge fund.
According to the original complaint, starting in 2010, Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his community, in order to invest in a risky options trading strategy.
Scronic was also accused of making material misrepresentations to investors to raise money for his fictitious hedge fund, the Scronic Macro Fund. Despite sustaining investment losses and misappropriating money for his own use, he represented to investors their investments had seen substantial gains.
Scronic reportedly told investors that he had a long and impressive track record of proven returns. However, he was actually “hemorrhaging investor money” through massive trading losses, the SEC said, with at least $15 million in investment losses since April 2010. In the second quarter of 2017, he allegedly reported to investors total assets of at least $21.8 million, but the balance in his brokerage account at that time was just under $27,500.
Scronic was a registered representative associated with the broker-dealer Morgan Stanley & Co. LLC from August 1998 to October 2005.
In September 2018, he was sentenced to eight years in prison and three years of supervised release after pleading guilty to one count of securities fraud.