The U.S. Securities and Exchange Commission was already on Francesco Rusciano’s case for accusations that he defrauded investors of $30 million when the FBI came knocking over mail fraud allegations. He is due back in court on May 21.
On May 1, the FBI arrested the 27-year-old from Stamford who runs two hedge fund companies -- Ponta Negra Fund I, LLC, Ponta Negra Offshore Fund I, Ltd., and Ponta Negra Group, LLC -- from his home. He was released on a $500,000 and placed into the custody of his parents, who put up their homes in New Jersey and Vermont as collateral, the Stamford Advocate reports.
Rusciano's resume looks impressive until you look at the facts behind it. He worked for UBS Securities in Stamford from 2003 to June 1, 2006 as a securities trader, but resigned after UBS discovered problems with his trading, according to the SEC.
Rusciano, who performed "marginally" when given a "modest sum to trade in 2006," claimed to have managed a portfolio worth more than $1 billion and quadrupled profits, the Stamford Advocate reports, citing the affidavit.
Those facts seem to have brought in the clients, including a New York investor who gave Rusciano $500,000. That is the center of the mail fraud investigation.
While Rusciano is being held on the mail fraud charges, he remains the focus of an investigation by the U.S. Securities and Exchange Commission.
The SEC filed a 10-page complaint in Texas on April 27 claiming Rusciano raised at least $31 million from 15 investors after forging documents, promising false returns, misrepresenting assets in funds he’d managed and not coming clean with how much he’d lost in trading.
"Rusciano went to great lengths to deceive investors, and the SEC is committed to ensuring that money managers who provide inaccurate information to investors and fail to uphold their fiduciary duties are held responsible for their misconduct," Rose Romero, Director of the SEC's Fort Worth Regional Office, said.
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In one case, he handed over false documents claiming to have $42,967,338.90 in an account that actually had $2,967,338.90, according to the SEC complaint.
The Board of Governors of the Federal Reserve started investigating Rusciano in January over his resignation for UBS, saying he violated the law and practices unsound banking practices.
Assistant U.S. District Attorney Michael McGarry told the Advocate that investigators have not been able to locate about $8 million that Rusciano should have, according to an October 2008 filing the manager made. Investigators have found assets including a U.S. JP Morgan account with $900,000 and a JP Morgan account in Brazil with $40,000. There is a concern that part of Rusciano's business was associated with Cayman Islands and there could be money there, authorities told the newspaper.
