Fund Manager and Former Race Car Team Owner Charged With Multimillions Dollar Fraud
From the Desk of Jim Eccleston at Eccleston Law LLC:
The Securities and Exchange Commission (SEC) has charged Andrew Franzone, former owner of a race car team and investment adviser FF Fund Management, LLC ("FFM") with fraudulently raising and misappropriating tens of millions of dollars from the sale of limited partnership interests in a private fund, FF Fund I, LP.
The SEC alleged that Franzone defrauded investors by making misrepresentations regarding the fund's strategy and investments. The SEC's complaint also alleges that Franzone failed to eliminate or disclose conflicts of interest, misappropriated fund assets, and falsely represented that the fund would receive annual audits.
According to the SEC complaint, Franzone told potential and existing investors that his investment strategy for the fund was to maintain a highly liquid portfolio primarily focused on options and preferred stock trading. Franzone allegedly raised more than $38 million for the fund from approximately 90 investors through these representations.
As alleged in the complaint, Franzone diverted substantial fund assets to an entity he owned and invested the fund's remaining assets mainly in highly illiquid private companies and real estate ventures. The SEC also alleged that Franzone took personal loans from the founders of at least two companies in which the fund invested, pledged fund assets to secure other loans for his benefit, and misappropriated fund assets for personal uses, including the purchase of a garage to store his private race car collection. The complaint alleges that Franzone and FFM removed critical safeguards for investors by failing to have the fund audited every year.
The SEC's complaint alleges that Franzone aided and abetted FFM's violations of the antifraud provisions of the federal securities, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC seeks disgorgement of ill-gotten gains, civil penalties, and permanent and conduct-based injunctive relief.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
Tags: eccleston, eccleston law, sec, ffm
