SEC Charges Castle Hill Financial Group in $1.8 Million Investment Adviser Fraud Scheme

The U.S. Securities and Exchange Commission (SEC) has filed an enforcement action in the District of Massachusetts, alleging a significant breach of fiduciary duty by an investment adviser and his firm.

According to the SEC complaint filed on April 2, 2026, against the Estate of John R. Brodacki, III and Castle Hill Financial Group, LLC, the defendants are accused of orchestrating a multi-year scheme that misappropriated approximately $1.68 million from at least 18 advisory clients (SEC Complaint, Case 3:26-cv-30055, filed April 2, 2026) .

The Alleged Scheme

The SEC alleges that from June 2018 to September 2025, Brodacki and Castle Hill persuaded clients to transfer funds directly to the firm, claiming the money would be invested for their benefit or that of family members (SEC Complaint 1–3).

Promised investments included:

• High-yield notes and bonds
• Certificates of deposit and “safe” income strategies
• Private equity and securities in private companies
• High-yield bank account alternatives

However, instead of executing these investments, the SEC alleges that client funds were misappropriated and diverted (SEC Complaint 3–5) .

Misappropriation and Ponzi-Like Activity

According to the complaint, investor funds were used for:

• Personal expenses, including travel, dining, tuition, and luxury expenditures
• Business expenses such as rent and operational costs
• Payments to family members
• Repayments to other clients using new investor funds

This pattern, as alleged, reflects hallmarks of a Ponzi-style structure, where earlier investors are repaid using incoming funds from newer clients (SEC Complaint 3, 57–58) .

In addition, the SEC alleges that fabricated account statements were provided to certain clients, showing fictitious investments and performance, including references to non-existent assets (SEC Complaint 4, 28, 36) .

Targeting of Vulnerable Investors

A critical aspect of the case is the profile of the affected clients.

The SEC alleges that many victims were:

• Elderly or retired individuals
• Clients living on fixed incomes
• Individuals with limited investment experience
• Seriously ill clients

Many clients had longstanding relationships with the adviser and relied on trust instead of independently verifying transactions.

Key Financial Figures

The complaint outlines the scope of the alleged misconduct:

• Total funds raised: Approximately $1,845,085
• Total repayments: Approximately $162,750
• Estimated net losses: Approximately $1.68 million
• Number of affected clients: At least 18

(SEC Complaint 56–57)

Bank records cited in the complaint indicate that little to none of the investor funds were used for legitimate investments (SEC Complaint 25, 58) .

Breakdown of Fiduciary Failures

The case highlights several critical failures that frequently appear in investment fraud matters:

Direct Payments Outside Custodial Accounts
Clients were instructed to send funds directly to the adviser’s firm, bypassing standard custodial safeguards (SEC Complaint 23–24) .

False Reporting and Lack of Transparency
Clients were not provided legitimate account statements, or were given fabricated ones (SEC Complaint 27–28) .

Continued Misconduct After Termination
The adviser allegedly continued soliciting funds even after being terminated by a supervising registered firm in July 2025 (SEC Complaint 20–22) .

Regulatory Violations

The SEC alleges violations of:

• Section 206(1) of the Investment Advisers Act of 1940 (fraud)
• Section 206(2) (deceptive practices and breach of fiduciary duty)

(SEC Complaint 61–68)

The Commission is seeking:

• Permanent injunctions
• Disgorgement of ill-gotten gains with interest
• Civil monetary penalties

(SEC Complaint Prayer for Relief)

Investor Recovery Considerations

Cases like this often involve more than just the individual adviser.

Potential avenues for recovery may include:

• Supervising firms and compliance failures
• Custodians and transaction oversight
• Third-party intermediaries
• Insurance coverage, including Errors & Omissions policies

Regulatory actions such as this SEC complaint frequently serve as a foundation for investor recovery through FINRA arbitration and civil litigation.

Sonn Law Group Perspective

Investment fraud cases involving fiduciary breaches and Ponzi-like conduct require a comprehensive investigative approach.

Sonn Law Group focuses on:

• Tracing the flow of investor funds
• Identifying all potentially liable parties
• Leveraging regulatory findings to support recovery claims
• Pursuing arbitration and litigation strategies designed to maximize recovery

Conclusion

This case highlights a recurring issue in securities fraud litigation: misconduct often results from the misuse of trust, not just complex schemes.

When fiduciary obligations are violated, accountability is essential to address past harm and protect future investors.