The SEC charged a Juno Mother Earth Asset Mgmt and its 2 founders with orchestrating a multi-faceted scheme to defraud clients and failing to comply with fiduciary obligations.   Eugenio Verzili and Arturo Rodriguez allegedly, through their firm, misappropriated client assets, inflated assets under management, and filed false information with the SEC.  In all, they are said to have taken $1.8mn from a hedge fund they manage, which they used for personal expenditures.  The pair issued promissory notes to conceal a substantial portion of their misappropriation.

Juno and founders also misrepresented that some Juno partners had invested millions in one of its funds when, in reality, they had they actually invested nothing. 

    SEC Allegations.   According to the SEC’s complaint, Juno sold securities in client brokerage and commodity accounts and directed 41 separate transfers of cash to Juno’s bank account, claiming falsely that the transfers were reimbursements for expenses Juno had incurred on behalf of the client fund. Verzili and Rodriguez later fabricated and issued nine promissory notes to make it appear that the client fund had invested the money in Juno. But they concealed the so-called investment from the independent directors of the client fund.

The SEC’s complaint further alleges that Juno, Verzili and Rodriguez marketed investments in the Juno-advised fund and failed to disclose Juno’s precarious financial condition to investors. They also failed to disclose that Juno owed a client fund a minimum of $1.2 million, which represented the proceeds of the promissory notes. While offering and selling securities in the client fund, Juno repeatedly inflated and misrepresented the amount of assets that Juno managed and claimed at one point that Juno had as much as $200 million under management.  Verzili also represented falsely to investors that Juno’s partners had up to $3 million of their own capital invested in a client fund. Juno’s partners had never actually invested any of their own money.

The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.

    SEC Staff Credits.   Investigated by NYRO staff - Ken Joseph, Mark Salzberg, Elzbieta Wraga, with assistance from examiners Eugenio Cantiello, Majid Mahmood, Raymond Slezak and Joseph DiMaria. Jack Kaufman will lead the SEC’s litigation.    [SEC PR 11-66, 3/15]