NY Area Hedge Fund Manager Charged With Running $19M Ponzi Scheme

Oct 5 2017 | 11:49pm ET

A New York area hedge fund manager has been accused of running a Ponzi scheme that defrauded investors out of some $19 million.

Michael Scronic was charged with securities and wire fraud and also faces separate civil charges by the SEC, according to a Reuters article and a statement from the U.S. Attorney’s Office for the Southern District of New York. The documents allege Scronic ran a Ponzi scheme through his Scronic Macro Fund by lying about the performance of the fund and spending investor capital supporting what the U.S. Justice Department described as a “lavish” lifestyle replete with beach and country club memberships and a vacation house in Vermont.

Scronic raised more than $19 million from 45 investors in the Westchester-based Scronic Macro Fund from April 2010 to the present, the U.S. said in a statement, and told investors that the fund had generated positive returns in all but one of the last 22 calendar quarters. In reality, the U.S. said, the fund lost money in 28 out of the 29 quarters it was in operation, and lost about $15.7 million before commissions.

Despite the losses, Scronic allegedly continued to pitch the fund’s performance and generated account statements that vastly overstated its assets under management. For instance, June 2017 account statements reportedly showed assets in the fund of $21.7 million, while the actual combined balance in the fund’s brokerage and bank accounts was $102,376, the U.S. said. 

A spate of investor redemptions led to the scheme’s collapse. According to the Justice Department, about $1.5 million in redemptions came in from four investors in Scronic’s fund between July and August 2017, and he was unable to honor them. 

Scronic was released on $500,000 bond after a court appearance. The case is U.S. v. Scronic, 17-mj-07351, U.S. District Court, Southern District of New York (Manhattan).


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