Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 1 of 5 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

Transcription

1 Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 1 of 5 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Civil Action No. 3:17-cv VAB MARK J. VARACCHI and SENTINEL GROWTH FUND MANAGEMENT, LLC, Defendants, and RADAR ALTERNATIVE FUND LP and RADAR ALTERNATIVE MASTER FUND SPC, Relief Defendants. SECURITIES AND EXCHANGE COMMISSION S ASSENTED TO MOTION FOR ENTRY OF JUDGMENT Plaintiff Securities and Exchange Commission (the Commission respectfully seeks the Court s entry of judgment, in consideration of the consent filed herewith from Mark J. Varacchi ( Varacchi and Sentinel Growth Fund Management, LLC ( Sentinel (together, Defendants, and Radar Alternative Fund LP and Radar Alternative Master Fund SPC (together, Relief Defendants. Defendants and Relief Defendants have assented to this motion. Filed contemporaneously with this motion are the Consent to Entry of Judgment executed by Defendants and Relief Defendants, and a proposed Judgment. In entering into the Consent and assenting to the instant motion, Defendants and Relief Defendants have agreed to entry of the proposed Judgment which, among other things, (i permanently enjoins Defendants from violating the provisions of the federal securities laws charged in the Complaint, and (ii provides

2 Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 2 of 5 that the Court will determine on later motion whether to award disgorgement against Defendants or Relief Defendants or penalties against Defendants and, if so, in what amount(s. The proposed Judgment permanently restrains and enjoins Defendants from violation of Section 10(b of the Securities Exchange Act of 1934 [15 U.S.C. 78j(b] and Rule 10b-5 thereunder [17 C.F.R b-5], Section 17(a of the Securities Act of 1933 [15 U.S.C. 77q(a], and Sections 206(1, 206(2, and 206(4 of the Investment Advisers Act of 1940 [15 U.S.C. 80b-6(1, (2 & (4] and Rule 206(4-8 thereunder [15 C.F.R (4-8]. The proposed Judgment also provides that, upon motion of the Commission and absent further agreement between the parties, the Court will determine whether it is appropriate to order Defendants or Relief Defendants to pay disgorgement of ill-gotten gains with prejudgment interest, and, if so, the amount of disgorgement. Further, the proposed Judgment provides that, upon motion of the Commission and absent any further agreement of the parties, the Court will determine whether it is appropriate to order Defendants to pay a civil penalty, and, if so, the amount of the penalty. The proposed Judgment provides that, in connection with a Commission motion for disgorgement and/or civil penalties, and at any hearing held on such a motion: (a Defendants and Relief Defendants will be precluded from arguing that Defendants did not violate the federal securities laws as alleged in the Complaint; (b Defendants and Relief Defendants may not challenge the validity of the Consent or Judgment; (c solely for the purposes of such motion, the allegations of the Complaint shall be accepted as and deemed true by the Court; and (d the Court may determine the issues raised in the motion on the basis of affidavits, declarations, excerpts of sworn deposition or investigative testimony, and documentary evidence, without 2

3 Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 3 of 5 regard to the standards for summary judgment contained in Rule 56(c of the Federal Rules of Civil Procedure. The proposed Judgment also provides that the Court will retain jurisdiction over this matter to, among other things, enforce the terms of the Judgment and to oversee any receivership. The Commission is separately moving for appointment of a receiver to stand in the shoes of Sentinel and the Radar Funds to, among other things, marshal, collect, and maintain assets with a view to distribution. WHEREFORE, the Commission respectfully moves for the entry of the proposed Judgment against Defendants and Relief Defendants, filed herewith. 3

4 Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 4 of 5 Respectfully submitted, SECURITIES AND EXCHANGE COMMISSION By its attorneys, /s/ Michael C. Moran Martin F. Healey (Mass. Bar No Regional Trial Counsel Michael C. Moran (Mass. Bar No , CT phv08741 Enforcement Counsel Cynthia Storer Baran (Illinois Bar No Senior Enforcement Counsel Naomi Sevilla (Mass. Bar No Senior Advisor Robert Baker (Mass. Bar No Assistant Regional Director Boston Regional Office 33 Arch Street, 24th Floor Boston, MA ( (Moran direct ( (fax moranmi@sec.gov (Moran Local Counsel: John B. Hughes (Fed. Bar No. CT Assistant United States Attorney Chief, Civil Division United States Attorney s Office Connecticut Financial Center 157 Church Street, 23rd Floor New Haven, CT ( ( (fax DATED: April 18,

5 Case 3:17-cv VAB Document 11 Filed 04/18/17 Page 5 of 5 CERTIFICATE OF SERVICE I certify that on April 18, 2017, I caused a copy of the foregoing to be served upon the following counsel for Defendants by Rodney Villazor SMITH VILLAZOR LLP 1700 Broadway, Suite 2801 New York, NY /s/ Michael C. Moran 5

6 Case 3:17-cv VAB Document 11-1 Filed 04/18/17 Page 1 of 9 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Civil Action No. 3:17-cv VAB MARK J. VARACCHI and SENTINEL GROWTH FUND MANAGEMENT, LLC, and Defendants, RADAR ALTERNATIVE FUND LP and RADAR ALTERNATIVE MASTER FUND SPC, Relief Defendants. CONSENT TO ENTRY OF JUDGMENT OF DEFENDANTS MARK J. VARACCHI AND SENTINEL GROWTH FUND MANAGEMENT, LLC AND RELIEF DEFENDANTS RADAR ALTERNATIVE FUND LP AND RADAR ALTERNATIVE MASTER FUND SPC 1. Defendants Mark J. Varacchi ("Varacchi" and Sentinel Growth Fund Management, LLC ("Sentinel" (together "Defendants" and Relief Defendants Radar Alternative Master Fund LP and Radar Alternative Master Fund SPC (together "Relief Defendants" having waived service of a summons and the Complaint in this action, enter a general appearance, and admit the Court's jurisdiction over Defendants and Relief Defendants and over the subject matter ofthis action. 2. Defendant Varacchi has pleaded guilty to criminal conduct relating to certain matters alleged in the Complaint in this action. Specifically, in United States v. Varacchi, Crim. No. l:17-cr nrb (S.D.N. Y, Varacchi pleaded guilty to a criminal information charging 1

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15 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 1 of 7 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Civil Action No. 3:17-cv VAB MARK J. VARACCHI and SENTINEL GROWTH FUND MANAGEMENT, LLC, Defendants, and RADAR ALTERNATIVE FUND LP and RADAR ALTERNATIVE MASTER FUND SPC, Relief Defendants. JUDGMENT AS TO DEFENDANTS MARK J. VARACCHI AND SENTINEL GROWTH FUND MANAGEMENT, LLC AND RELIEF DEFENDANTS RADAR ALTERNATIVE FUND LP AND RADAR ALTERNATIVE MASTER FUND SPC The Securities and Exchange Commission having filed a Complaint, and Defendants Mark J. Varacchi ( Varacchi and Sentinel Growth Fund Management, LLC ( Sentinel (together Defendants and Relief Defendants Radar Alternative Master Fund LP and Radar Alternative Master Fund SPC (together Relief Defendants having entered a general appearance; consented to the Court s jurisdiction over Defendants and Relief Defendants and the subject matter of this action; consented to entry of this Judgment; waived findings of fact and conclusions of law; and waived any right to appeal from this Judgment:

16 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 2 of 7 I. IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendants are permanently restrained and enjoined from violating, directly or indirectly, Section 10(b of the Securities Exchange Act of 1934 (the Exchange Act [15 U.S.C. 78j(b] and Rule 10b-5 promulgated thereunder [17 C.F.R b-5], by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security: (a (b to employ any device, scheme, or artifice to defraud; to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in Federal Rule of Civil Procedure 65(d(2, the foregoing paragraph also binds the following who receive actual notice of this Judgment by personal service or otherwise: (a Defendants officers, agents, servants, employees, and attorneys; and (b other persons in active concert or participation with Defendants or with anyone described in (a. II. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants are permanently restrained and enjoined from violating Section 17(a of the Securities Act of 1933 (the Securities Act [15 U.S.C. 77q(a] in the offer or sale of any 2

17 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 3 of 7 security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (a (b to employ any device, scheme, or artifice to defraud; to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in Federal Rule of Civil Procedure 65(d(2, the foregoing paragraph also binds the following who receive actual notice of this Judgment by personal service or otherwise: (a Defendants officers, agents, servants, employees, and attorneys; and (b other persons in active concert or participation with Defendants or with anyone described in (a. III. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants are permanently restrained and enjoined from violating Sections 206(1 and 206(2 of the Investment Advisers Act of 1940 (the Advisers Act [15 U.S.C. 80b-6(1 & (2], by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly: (a (b to employ any device, scheme, or artifice to defraud clients or potential clients; or to engage in any transaction, practice, or courses of business which operates as a fraud or deceit upon a client or prospective client. 3

18 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 4 of 7 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in Federal Rule of Civil Procedure 65(d(2, the foregoing paragraph also binds the following who receive actual notice of this Judgment by personal service or otherwise: (a Defendants officers, agents, servants, employees, and attorneys; and (b other persons in active concert or participation with Defendants or with anyone described in (a. IV. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendants are permanently restrained and enjoined from violating Section 206(4 of the Advisers Act [15 U.S.C. 80b-6(4] and Rule 206(4-8 thereunder [15 C.F.R (4-8], by use of the mails, and the means and instrumentalities of interstate commerce, directly or indirectly: (a to make any untrue statements of a material fact or to omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, to any investor or prospective investor in a pooled investment vehicle; or (b to otherwise engage in any act, practice, or course of businesses that is fraudulent, deceptive or manipulative, with respect to investors or prospective investors in a pooled investment vehicle. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in Federal Rule of Civil Procedure 65(d(2, the foregoing paragraph also binds the following who receive actual notice of this Judgment by personal service or otherwise: (a Defendants officers, agents, servants, employees, and attorneys; and (b other persons in active concert or 4

19 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 5 of 7 participation with Defendants or with anyone described in (a. V. Upon motion of the Commission, absent further agreement between the parties, the Court shall determine whether it is appropriate to order Defendants or Relief Defendants to pay disgorgement of ill-gotten gains, and, if so, the amount of such disgorgement. If disgorgement is ordered, Defendants and Relief Defendants shall pay prejudgment interest thereon, calculated from August 22, 2013, based on the rate of interest used by the Internal Revenue Service for the underpayment of federal income tax as set forth in 26 U.S.C. 6621(a(2. Upon motion of the Commission, absent further agreement between the parties, the Court shall determine whether it is appropriate to order Defendants to pay a civil penalty pursuant to Section 20(d of the Securities Act [15 U.S.C. 77t(d], Section 21(d(3 of the Exchange Act [15 U.S.C. 78u(d(3] and Section 209(e of the Advisers Act [15 U.S.C. 80b-9(e] and, if so, the amount of the civil penalty. In connection with the Commission s motion for disgorgement and/or civil penalties, and at any hearing held on such a motion: (a Defendants and Relief Defendants will be precluded from arguing that Defendants did not violate the federal securities laws as alleged in the Complaint; (b Defendants and Relief Defendants may not challenge the validity of the Consent or this Judgment; (c solely for the purposes of such motion, the allegations of the Complaint shall be accepted as and deemed true by the Court; and (d the Court may determine the issues raised in the motion on the basis of affidavits, declarations, excerpts of sworn deposition or investigative testimony, and documentary evidence, without regard to the standards for summary judgment contained in Rule 56(c of the Federal Rules of Civil Procedure. In connection with 5

20 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 6 of 7 the Commission s motion for disgorgement and/or civil penalties, the parties may take discovery, including discovery from appropriate non-parties. VI. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Consent is incorporated herein with the same force and effect as if fully set forth herein, and that Defendants and Relief Defendants shall comply with all of the undertakings and agreements set forth therein. VII. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. 523, the allegations in the Complaint are true and admitted by Defendant Varacchi, and further, any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant Varacchi under this Judgment or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a(19 of the Bankruptcy Code, 11 U.S.C. 523(a(19. VIII. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction over this matter, including, but not limited to, jurisdiction for the following purposes: (i to enforce the terms of this Judgment; (ii to consider any motion for the appointment of a receiver, for approval of a plan of distribution to investors or creditors, or for the establishment of a Fair Fund, or for miscellaneous relief related to any such motions; and (iii to enforce any 6

21 Case 3:17-cv VAB Document 11-2 Filed 04/18/17 Page 7 of 7 Order concerning appointment of a receiver, a plan of distribution, or the establishment of a Fair Fund. Dated:, VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE 7