SEC Charges Agent Funds and Principals with Fraud and Registration Violations; Settles with Other Agent Funds to Registration Violations

Last week, the Securities and Exchange Commission (SEC) took legal action against Pisces Income Fund, LLC, Pisces Income Fund Parallel, LLC, along with their principals Shannon Westhead and Alec Vagnozzi; Capricorn Income Fund I, LLC, Capricorn Income Fund I Parallel, LLC, and their principal Albert Vagnozzi; Merchant Services Income Fund, LLC, Merchant Services Income Fund Parallel, LLC, and their principal Michael Tierney. These actions were taken due to alleged violations of federal securities laws linked to their involvement in a fraudulent securities offering by Complete Business Solutions Group, also known as Par Funding (“CBSG”), which amounted to over $500 million and was conducted without proper registration.

These entities, acting as agent funds for CBSG, along with the individuals, raised more than $65 million from approximately 260 investors across the nation, with the intention of investing in CBSG. These actions are alleged to have violated securities laws related to antifraud provisions, securities registration, and broker-dealer registration.

Additionally, the SEC’s complaint asserts that when they solicited investors, the individual defendants provided false information and omitted key details regarding CBSG’s regulatory history and the criminal background of CBSG’s principal. The SEC’s complaint has been filed in the U.S. District Court for the Southern District of Florida, and it charges Westhead, Alec Vagnozzi, Albert Vagnozzi, and Tierney with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. It also alleges that all defendants violated the registration provisions of Section 5 of the Securities Act. The SEC’s complaint seeks permanent injunctions and the disgorgement of ill-gotten gains with prejudgment interest against all defendants, as well as civil monetary penalties against Westhead, Alec Vagnozzi, Albert Vagnozzi, and Tierney.

Furthermore, the SEC has also initiated a civil injunctive action against ABFP Income Fund 3, LLC; ABFP Income Fund 3 Parallel, LLC; ABFP Income Fund 4, LLC; ABFP Income Fund 4 Parallel, LLC; ABFP Income Fund 6, LLC; ABFP Income Fund 6 Parallel, LLC; ABFP Multi-Strategy Investment Fund, LP; ABFP Multi-Strategy Investment Fund 2, LP; and ABFP Income Fund Parallel, LLC. This action is based on their involvement in CBSG’s offerings. These ABFP Funds, established in 2019 by Dean Vagnozzi, raised approximately $99 million from over 570 investors. In this settled action, filed in the Southern District of Florida, the ABFP Funds, without admitting or denying the SEC’s findings, agreed to an order acknowledging their violation of the registration provisions of Section 5 of the Securities Act, along with injunctive relief and disgorgement of ill-gotten gains plus prejudgment interest.

This marks the fourth enforcement action related to the CBSG fraud. In July 2020, the SEC initiated an emergency action against CBSG, securing orders to freeze CBSG’s assets and appoint a receiver over certain related entities. In June 2022, charges were brought against registered investment adviser A.G. Morgan Financial Advisors, LLC, in connection with its unlawful participation in CBSG’s fraudulent offering, and in July 2022, settled charges were announced against Philadelphia attorney John W. Pauciulo for his role in CBSG’s offering.

If you suspect your advisor mismanaged your money or committed negligence or fraud, call Sonn Law Group for a free consultation at 833-912-3000 today.