SEC Charges South Florida Man with Fraudulent Operation of Private Fund

January 14, 2022/US SEC

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The Securities and Exchange Commission announced today that on January 12, 2022, the Honorable Judge Donald M. Middlebrooks of the United States District Court for the Southern District of Florida entered a judgment permanently enjoining Florida resident Anthony M. Cottone from violations of the antifraud and other provisions of the federal securities laws. The SEC filed a complaint on January 10, 2022 charging Cottone with fraudulently operating a private fund. Cottone consented to the entry of the injunction without admitting or denying the allegations of the complaint.

According to the SEC’s complaint, from March 23, 2017 to July 31, 2017, Cottone and his now defunct unregistered investment adviser raised approximately $2.76 million from 11 investors in connection with the sale of preferred interests in a private fund through false and misleading representations and material omissions. The complaint alleges Cottone misappropriated at least $134,000 from the fund. The complaint further alleges that Cottone failed to disclose to investors that he used fund assets to pay investors in a prior unrelated securities offering, that he used fund assets to pay his unregistered investment adviser, that he received undisclosed commission payments out of fund assets, that he used fund assets to operate a start-up car dealership he formed and managed, and that he has a prior criminal conviction. In addition to his alleged misrepresentations and omissions, the complaint alleges Cottone sold securities in unregistered transactions and acted as an unregistered broker.

The SEC’s complaint charges Cottone with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and seeks a permanent injunction, disgorgement of ill-gotten gains, and civil penalties. The SEC’s complaint also charges as a relief defendant Botanica Group Holdings, LLC for the sole purpose of recovering fund assets it received.

Without admitting or denying the allegations in the SEC’s complaint, Cottone consented to the entry of the judgment that permanently enjoins him from violating the above-mentioned provisions of the federal securities laws and to have the court consider the SEC’s claims for disgorgement, prejudgment interest, and civil penalties at a later date, and Botanica Group consented to the entry of a judgment, which was also issued on January 12, 2022, that orders it to pay disgorgement and prejudgment interest in amounts to be determined by the Court at a later date.

The SEC’s investigation was conducted by Shelly-Ann A. Springer-Charles and Lina M. Fernandez and was supervised by Eric R. Busto and Glenn S. Gordon. The SEC’s litigation will be led by Andrew O. Schiff.

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