The Securities and Exchange Commission has charged Boca Raton, Florida resident Scott Strochak, a former registered broker, for making material misrepresentations regarding an investment fund scheme that targeted retail investors and for acting as an unregistered broker.
The SEC alleges that Strochak participated in a fraudulent scheme that raised nearly $3.8 million from at least 17 retail investors until the SEC halted the scheme in February when it filed an emergency action against Castleberry Financial Services Group LLC, its president T. Jonathon Turner and its CEO Norman Strell.
According to the SEC’s complaint, Strochak, who had decades of experience in the financial services industry at firms such as Morgan Stanley, Merrill Lynch, And Neuberger Berman, solicited investors using false representations that Castleberry investments were bonded and insured by leading insurance companies, even after he received several complaints from investors who were not provided proof of such insurance.
The SEC claims that Strochak also allegedly misrepresented Castleberry’s profitability, despite knowing that the firm denied some investors’ requests to withdraw their principal due to insufficient funds.
The SEC alleges that Strochak was reckless in repeating Castleberry’s false claims that it had grown by $600 million in capital and had 300 investors in 2018, when he knew that, as the sole sales agent until December 2018, he had brought in only about $2 million from about seven investors that year.
In a parallel criminal action, the U.S. Attorney’s Office for the Southern District of Florida criminally charged Turner, Strell and Strochak in May 2019. Strochak pleaded guilty on August 16, 2019 and is awaiting sentencing.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida alleges that Strochak violated the antifraud provisions of federal securities laws. He agreed to a judgment that permanently enjoins him from violating the charged provisions and orders him to pay disgorgement and prejudgment interest totaling $250,056, to be offset by any restitution order entered against him in the parallel criminal case. The settlement is subject to court approval.