The SEC reached an end in its complaint against an unregistered broker who'd already pleaded guilty in federal court to defrauding investors of more than $1.6 million, using the funds for personal expenses, luxury goods and debit card transactions at casinos.
In November of last year, Christopher Fulco was sentenced to three years in prison, followed by three years of supervised release, and was ordered to pay more than $1.6 million in restitution in Montana federal court, after pleading guilty to mail fraud, money laundering and securities fraud in July (though Fulco lived in Staten Island, N.Y., one of the affected investors was a Montana resident).
“Montanans are used to taking people at their word,” U.S. Attorney Kurt Alme said at the time of the sentencing. “Those who exploit that trust to commit fraud will be caught, prosecuted and jailed.”
The SEC first charged Fulco in Sept. 2019, claiming he’d solicited investors for funding a number of entities, including a private electric vehicle company, a medical device company, a fund he claimed to manage and a promissory note.
But he did so using several aliases to disguise the fact that he’d been barred from the industry by FINRA.
According to the commission’s complaint and his BrokerCheck profile, Fulco was barred in 2014. According to the FINRA settlement excluding Fulco from the industry, he began selling securities in an Appalachian coal production company while he worked at VFinance Investments in 2009, and he did so without telling the firm. He also provided false testimony to FINRA about this, and tried to convince someone else with knowledge to avoid testifying or to make false statements if they did, according to the FINRA settlement (Fulco agreed to the barring without admitting or denying the findings).
In his new scheme, Fulco’s aliases included the names “Christian Anthony” or “Jonathan Stewart.” Fulco was able to convince at least 10 individuals to invest about $1.6 million via his company, JM Capital Holdings, though neither Fulco nor his firm were ever registered with the SEC. Fulco withdrew funds from JM Capital’s account to use for himself at casinos or on vacations and for other personal expenses, and also withdrew more than $68,000 from the firm’s account, transferring the funds to his fiancee, the complaint read.
When he solicited potential clients, Fulco would often tout investments in a number of private companies he said were preparing for an initial public offering. To support the deception, Fulco concocted a number of false stock purchase agreements and escrow agreements; in some, he claimed JM Capital was the owner of the securities or acting as the seller’s representative. In reality, he never represented either of the companies; in fact, one had already gone public when Fulco made the claims, according to the complaint.
In one instance, Fulco used an alias to convince a then-90-year-old veteran to invest in the JM Capital High Yield Fund. Fulco told the investor that JM Capital operated the fund, which invested in dividend-paying stocks and promised investors 20% returns within 18 months.
“But no such fund ever existed,” the complaint read. “The investor wired JM Capital a total of $94,000. And Fulco misappropriated every dollar.”
To accomplish this, Fulco helped the veteran open a brokerage account in their own name and transferred securities he already owned into it. Fulco liquidated most of those securities, helped the investor transfer some $50,000 of the profit from those sales back into a JM Capital account. While Fulco told the veteran the money would be invested in the Capital High Yield Fund, he stole most of it, investing only a bit of it into “short-term, speculative call options,” and the fund was never registered.
To pull all this off, Fulco had to lie to keep people investing, the complaint read. In different instances, Fulco would fabricate account statements, lie about prior investments, or lie about additional fees and costs investors would need to pay to custody or transfer their investments (which were completely fictitious). At one point, an investor told Fulco his family was concerned about the amount of funds he’d invested and the additional fees. Fulco responded by concocting an entirely new alias in “Michael Barron,” who he claimed was the firm’s chief compliance officer; the investor eventually gave Fulco more than $10,000 in additional investments.
In addition to barring Fulco, the SEC also determined that he (and JM Capital) were liable for disgorgement of more than $1.6 million but decided this was satisfied by the restitution mandated in the sentencing of Fulco’s criminal case.