Securities Arbitration Lawyers BlogSEC Charges Essex Capital Corporation and Securities Fraud Recidivist Ralph Iannelli in $80 Million Fraud
On June 6, 2018, the Securities and Exchange Commission (the “SEC”) charged Essex Capital Corporation and its founder, Ralph Iannelli, with defrauding investors in connection with the sale of over $80 million in promissory notes. Silver Law Group is investigating potential claims against third parties for losses in Essex Capital Corporation.
According to the SEC’s complaint, Iannelli and Essex Capital Corporation induced approximately 70 investors to collectively invest over $80 million dollars in the company’s failing equipment leasing business through two (2) unnamed registered investment advisors. Iannelli and Essex Capital Corporation induced these investors by making false and misleading statements and illusory personal guarantees to these two registered investment advisors.
The first investment advisor, based out of Santa Barbara, California, had been recommending Essex Capital Corporation to its customers since 2002. Between 2015 and 2017, this investment advisor invested over $8.1 million on behalf of over 20 customers in Essex Capital Corporation. According to the SEC complaint, a major reason this investment advisor recommended Essex Capital Corporation customers to invest were due to false financial statements prepared by Essex Capital Corporation’s outside accountant.
The second investment advisor, based out of New York, New York, invested approximately 15 clients in Essex Capital Corporation between 2015 and 2016. The second investment advisor’s customers invested approximately $23 million in Essex Capital Corporation. Similar to the first investment advisor, the second investment advisor primarily relied on the misrepresentations and false promises provided by Essex Capital Corporation and Iannelli, according to the SEC complaint.
According to the SEC complaint, Essex Capital Corporation was an equipment leasing company. Essex Capital Corporation sustained huge losses between 2014 and 2016 due, in part, to Essex Capital Corporation using the bulk of its revenues to pay back investors and banks instead of using it to purchase income generating equipment. To maintain its illusion of success, Essex Capital Corporation resorted to a pattern and practice of making Ponzi-like payments of at least $15 million since 2014.
This is not the first time Iannelli has had problems with the SEC. In 1974, according to the SEC’s complaint, the SEC filed a complaint against Iannelli alleging that he violated several federal securities laws by making unauthorized trades in customer accounts in order to manipulate the price of a stock.
Prior to recommending a security, registered investment advisors have a fiduciary duty to conduct adequate due diligence to ascertain whether or not a security is suitable. Determining suitability is a two-part process in which a registered investment advisor determines reasonable basis suitability and customer-specific suitability.
Reasonable basis suitability concerns whether a security is suitable for any investor. If it is not, the suitability analysis ends there and should not be sold to any customer.
Contact Our Firm if You’ve Lost Money Investing in Essex Capital Corporation
If you’ve lost money investing in Essex Capital Corporation, we may be able to help you recover your losses. Contact our firm today to learn how we can try to recover your losses. We work on a contingency fee, meaning if we don’t recover money you owe us nothing. Our lawyers have extensive experience in claims against banks, accountants and financial advisors who aid or assist a Ponzi scheme.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Scott Silver is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.