SEC v. Angelo A. Alleca, et al., Case No. 1:12-cv-03261-WSD (N.D. Ga.). On September 19, 2012, the SEC announced fraud charges against hedge fund manager Angelo A. Alleca and his investment advisory firm, Summit Wealth Management, Inc. and three funds he operated and controlled. The case concerns the loss of about $17 million in client assets by Summit Wealth Management, Inc. (“Summit Wealth”), a registered investment advisor based in Atlanta, Georgia, and its principal, Alleca. Alleca managed about $500 million of client assets held in managed accounts. Alleca started Summit Investment Fund, LP (“Summit Fund”), a private fund, for which he solicited investments from the clients of Summit Wealth. The investors were told that the fund would operate as a fund-of-funds, but, in fact, Alleca traded securities in the fund and lost significant amounts of money. To hide his losses, Alleca started at least two additional funds and raised capital for them from the clients of Summit Wealth. In exchange for providing capital, the clients received interests in the respective funds. The plan unraveled, however, because the funds suffered further losses. Summit Wealth hid the losses from its advisory clients, and the funds also hid the losses from the funds’ investors. Summit Wealth issued fake account statements to its clients that show the losses. Likewise, the funds issued false statements to their investors. Alleca used some of the capital that was obtained by newer investors to pay the older investors.
The SEC has charged the all Defendants with violations of Section 17(a) of the Securities Act, 10(b) of the Exchange Act and Rule 10b-5 thereunder. Alleca and Summit Wealth are also charged with violating Sections 206(1), (2), and (4) of the Investment Advisers Act and Rule 206(4) thereunder. The SEC already obtained a preliminary injunction and asset freeze. The SEC seeks injunctive relief, disgorgement and civil monetary penalties.