Summit Wealth Management, Inc. as well as its President Angelo A. Alleca, are being sued by the SEC. The SEC is alleging that Alleca, through his control of Summit Wealth defrauded customers of $17 million and is now seeking that the courts freeze all the accounts of the related parties and appoint a receiver. According to the suit there are approximately 200 investors who were affected by the scheme. The suit list as defendants Angelo Alleca, who is the ” founder, president, chief operating office, and chief compliance officer of Summit Wealth”, Summit Weakth management Inc, Summit Investment Fund, LP, Asset Class Diversification Fund, LP and Private Credit Opportunities Fund, LLC.
The SEC is alleging that Alleca defrauded investors by misguiding them as to what they were really investing into. In 2004, Summit Wealth started the Summit Investment Fund, LP which was a private fund which told investors that the fund would operate as a fund-of-funds, but the reality was that the fund begun “active securities trading in the fund and incurred substantial losses” according to the SEC.
Fund-of-Funds are a type of investment mechanism in which an investors invest his money in one type of fund, but that fund will solely invest in other funds. They are also sometimes referred to as multi-management funds because the investment is diversified as a result of having more that one fund.
The allegations by the SEC alleges that the fund actually actively invested directly in securities trading, which led to losses. As a result of the losses, Alleca allegedly started at least two additional funds, the Private credit Opportunities Fund, LLC and the Asset Class Diversification Fund, LP, in an effort to raise capital and hide the losses which the original fund suffered. The problem was that these two funds also suffered losses, which meant that there was no way to transfer money to the Summit Investment Fund.
These losses were allegedly hidden from both the advisory clients and the investors and the firm “issued statements of account to its advisory clients that did not reflect the substantial losses in the clients’ accounts” according to the filing. Furthermore, the statements issued to the investors did not show the “substantial losses” either. When it came time to pay redemption request, Alleca allegedly misappropriated money from the capital that was raised for the other funds. The result was, according to the filing, that nearly all of the $17 million which was invested into these funds is no longer there.
In essence, the “SEC’s complaint charges Alleca, Summit Wealth Management, and the three funds with violations of the antifraud provisions of the federal securities laws.”
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