For Release: April 30, 2008
New Jersey Federal Court Freezes Assets of Hedge Fund in Fraud Action Brought by the U.S. Commodity Futures Trading Commission
Robert J. Sucarato, d/b/a/ New York Financial Company, Claimed to Manage $7 Billion in Assets, Is Charged with Fraudulently Soliciting and Concealing Trading Losses by Issuing False Account Statements
Washington, DC − The U.S. Commodity Futures Trading Commission (CFTC) announced today that on April 22, 2008, a federal court in New Jersey entered a statutory restraining order against defendant Robert J. Sucarato d/b/a New York Financial Company (NYFC), freezing assets under Sucarato’s control, prohibiting the destruction of documents, and requiring Sucarato to account for assets.
The court’s order arises from a complaint filed under seal by the CFTC on the same day in the United States District Court for the District of New Jersey, charging Sucarato, d/b/a NYFC, with fraudulently soliciting at least $1.5 million from at least five individuals to participate in two commodity pools or “hedge funds” and with concealing trading losses by issuing false account statements to participants in the pools. The hedge funds – the NYFC Diversified Strategic Fund and the NYFC Strategic Fund – operate under the management of NYFC and purportedly invest in a variety of instruments, including commodity futures and options.
The complaint also charges Sucarato with failing to register as a commodity pool operator (CPO) and failing to comply with CPO regulatory requirements in connection with his operation of the pools.
According to the complaint, beginning in at least September 2004 and continuing to the present, Sucarato, as president of NYFC, fraudulently solicited individuals to participate in his hedge funds by falsely claiming, among other things, that: 1) he has managed the Funds since 1993 with approximately $7 billion in assets; 2) his funds routinely outperformed the market, having achieved a ten-year compounded return exceeding 1,800 percent; and 3) that NYFC is a registered investment adviser and portfolio manager.
In support of his misrepresentations, Sucarato allegedly used a false audit report purportedly prepared by a major accounting firm reflecting that NYFC had a net worth of over $800 million. Sucarato sought to create the false impression that NYFC is a successful, well established capital management firm with offices in New York and Chicago and staffed with more than 20 experienced traders. However, as charged in the complaint, Sucarato’s New York or Chicago offices were mere virtual offices.
“The sophistication required to fabricate an established management firm with a winning earnings record and the financial statements to back it up will not go unchallenged by a robust enforcement program. Once again, our enforcement program has exposed layers of deceit in the solicitation and management of a hedge fund,” said Gregory Mocek, Director of Enforcement at the CFTC.
The complaint further alleges that after convincing individuals to participate in the pools, Sucarato provided performance reports to pool participants reflecting, among other trading results, that NYFC was consistently highly profitable trading commodity futures and options on behalf of the pools. In reality, however, Sucarato held commodity futures and options trading accounts in his name only and sustained net losses almost every month he traded commodity futures and options. To the extent that Sucarato did not use pool participants funds to trade in his personal commodity futures and options accounts, the disposition of the participants’ funds is unknown.
Since at least April 2007, pool participants, whose performance reports reflected their investments had increased in value, have demanded that Sucarato liquidate their accounts and return their funds. The checks issued by Sucarato to cover these redemption requests were returned for insufficient funds.
The court set a hearing on the CFTC’s request for a preliminary injunction for May 8 at 3:00 p.m. The CFTC also seeks a permanent injunction against the defendants, disgorgement, restitution, and civil monetary penalties.
The following CFTC Division of Enforcement staff members are responsible for this case: James H. Holl, III, Kara Mucha, Michelle Bougas, Gretchen L. Lowe, and Vincent A. McGonagle.
Last Updated: April 30, 2008