SEC Charges John Bivona and Saddle River Advisors with Fraud
On March 25, 2016 the Securities and Exchange Commission (SEC) announced fraud charges and asset freezes obtained in a case filed against a New Jersey-based fund manager and two firms he controls that marketed shares in promising pre-IPO tech companies in the Bay Area. The SEC alleges they stole $5.7 million from investors and diverted millions more to other improper and undisclosed uses.
Specifically, the SEC alleges that John Bivona used money raised through Saddle River Advisors and SRA Management Associates to pay off earlier investors, prop up other funds, and pay family-related expenses. He secretly steered the lion’s share of misappropriated funds to his nephew Frank Mazzola, who was barred from the securities industry in a prior SEC enforcement action and is charged along with Bivona and his firms in the complaint filed Monday in federal district court in California.
According to the SEC’s complaint:
- Bivona raised more than $53 million from investors, and the money he was siphoning away for undisclosed uses left his firms continuously short of the cash needed to buy the shares promised to investors.
- Bivona kept the scheme going by indiscriminately transferring money among more than a dozen bank accounts associated with an array of different entities.
- Bivona used investor money to pay Mazzola’s credit card bills, income taxes, a car loan, attorney fees, and the mortgage on a Jersey Shore vacation home.
- Investors were told they would receive financial statements for the funds on an annual basis. But no financial statements were ever prepared.
- Bivona and Mazzola failed to register the offering with the SEC and thereby violated the bad actor rules of the federal securities laws, which prohibit companies from relying on registration exemptions under Rule 506 of Regulation D if a promoter or investment manager like Mazzola has a disqualifying event like his fraud-based injunction.
The SEC charges Bivona, Saddle River Advisors, and SRA Management Associates with violating Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8 thereunder, Section 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The SEC also charges Bivona with aiding and abetting Saddle River Advisors and SRA Management Associates in violating these provisions. The SEC charges Mazzola with violating the terms of his bar order, Section 203(f) of the Advisers Act, and Section 15(b)(6)(B)(i) of the Exchange Act, Bivona with aiding and abetting Mazzola’s violations, and Bivona, Saddle River Advisors, and SRA Management with violating Section 203(f) of the Advisers Act. Finally, the SEC charges Bivona, Mazzola, Saddle River Advisors, and SRA Management Associates with violating Section 5(a) and (c) of the Securities Act, and the Saddle River Advisors and SRA Management with violating Section 15(a) of the Exchange Act.
The SEC’s complaint seeks permanent injunctions plus disgorgement with prejudgment interest and monetary penalties from Bivona and the firms as well as Mazzola. The SEC obtained a court order to freeze the assets of Frank Mazzola and his wife, a relief defendant, and ordering the appointment of an independent monitor over Saddle River Advisors, SRA Management, the SRA Funds, and other affiliated entities. The order also preliminarily enjoins Bivona, Saddle River Advisors, and SRA Management Associates from violating the antifraud provisions of the federal securities laws and raising money from investors.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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