SEC Charges Connecticut Broker with Theft, Ponzi Scheme

On August 31, 2017, the SEC filed a complaint in federal court in Connecticut charging Leon William Vaccarelli, age 40, of Waterbury, CT with running a Ponzi scheme and theft of funds from a trust account of which he was the trustee.

Vaccarelli was named in the complaint along with his company, Lux Financial, and another entity that Vaccarelli operated, LWLVACC, LLC.

Vaccarelli entered the securities industry in 1999. He worked at The Investment Center in Waterbury from 2011 until his discharge in July 2017. He was discharged for not following company policy regarding providing access to his office and computer during a regulatory examination, i.e., the SEC investigation that culminated in the filing of the above complaint.

The SEC alleges that from 2012 until mid 2017, Vaccarelli induced nine customers to entrust over $1 million to him through his companies Lux Financial and LWLVACC. While he told these clients, many of whom were elderly, that they would be investing in private loans and investments, he actually was taking the funds given to him by these clients and placing the funds in personal and business banking accounts.

The SEC complaint details how Vaccarelli used these funds for personal and business expenses. He misrepresented the value of the clients’ purported investment accounts which, if they existed, often held no funds. He sometimes had customers liquidate existing positions so they could send him the sales proceeds for their “investments.”

In a classic Ponzi scheme tactic, he used funds deposited with him by some investors to pay “returns” to earlier investors.

According to the complaint, one client became suspicious and retained an attorney to get her money back from Vaccarelli. Vaccarelli used funds stolen from another client to pay back the complaining client. He also put language in the settlement agreement precluding the settling client from discussing the settlement with FINRA or the SEC.

Lastly, Vaccarelli became the trustee for a trust account held at The Investment Center. The account held over $400,000 in blue chip stocks and mutual funds. He ultimately sold those positions and transferred the funds to his personal accounts.

Vaccarelli was also fined $7,500 and suspended for one month by FINRA in 2015 for exercising discretion in customer accounts without having received written discretionary authority, as required by industry rules.

If you have questions or concerns over the handling of your account, contact Lubiner, Schmidt &Palumbo for a free legal consultation.