A former broker who spent years conning elderly investors out of their money to keep his Ponzi scheme running has agreed to settle with the SEC and is awaiting sentencing in federal court.
Earlier this month,
The U.S. Attorney's Office for the Eastern District of New York also charged the Freehold, New Jersey, man with felony wire fraud and securities fraud. According to online court records, DeGregorio pleaded guilty to both counts and will be sentenced in June.
Court documents said DeGregorio solicited money from four investors as he ran his scheme from October 2015 to March 2021. He promised to invest his clients’ funds in two private companies called Blue Omega and Globotix Inc.
Blue Omega was presented to clients as a cybersecurity company, and Globotix was a purported financial consulting firm. DeGregorio also told his clients he would invest in a promissory note with a guaranteed 13% annual return, claiming that the company offering the note made short-term loans to small businesses.
But the promissory note was fake and the private companies were complete fabrications that only served to support the fraud. DeGregorio stole most of the investors' money and used a portion of the funds to repay investors in a Ponzi-like fashion, according to court documents.
His victims are listed in court filings as a 94-year-old from New York; a 78-year-old from Idaho; and two Wisconsin residents who were 80 and 87. The 80-year-old is someone who DeGregorio has a prior business relationship with, and the rest of his clients were gained through cold calls.
Over time, DeGregorio gained their trust and confidence by claiming that he was a successful financial professional with high net worth clients around the world, court documents said.
The SEC said DeGregorio has agreed to settle with the agency and be enjoined from future violations of the charged provisions. The settlement is subject to court approval.
Securities litigation consultant and former regulator Louis Straney said cases like this only make life harder for the vast majority of advisors who want nothing more than to serve their clients and help them achieve their financial goals.
He added that driving this kind of behavior out of the industry starts with a top-down, cultural approach that makes clear what is and isn’t acceptable.
“I think advisors have to be willing to say to the firm, ‘this is where we need to be going as a firm,’” he said. “Either a small firm or a large firm, ‘these are my expectations for my career and for my clients.’ That can help cultivate what I think is a productive, fair and well-supervised culture within the organization.
“If somebody doesn't think that you're looking, they’ll do whatever they choose to do, and I think you really have to manage it from top-down because that's how the misconduct, in my opinion, takes place.”
Straney said with everyone working together and expecting excellence from those they consider their peers, there will be less room for bad actors to navigate. As a result, vulnerable populations like the elderly may be better protected.
“There are 650,000 or so brokers out there, and most of them do a wonderful job, never have a problem and don't get on the radar of anyone. But there are a few that create most of this kind of news,” Straney said. “As an individual or as an organization, always be looking for what you can do better … and make sure that this culture of excellence comes from the top down.”
Attempts to reach DeGregorio for comment were unsuccessful.
