SEC ALLEGES CO-OWNERS OF BROKERAGE FIRM USED INVESTOR FUNDS INAPPROPRIATELY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

05/20/2015 01:00 PM EDT

The Securities and Exchange Commission today announced fraud charges against the co-owners of a Manhattan-based brokerage firm.

The SEC alleges that as Arjent LLC and its UK-based affiliate Arjent Limited were approaching insolvency, chairman and CEO Robert P. DePalo attempted to keep the firms afloat and maintain his extravagant lifestyle by selling shares in a holding company called Pangaea Trading Partners.  DePalo along with managing director and co-owner Joshua B. Gladtke allegedly misrepresented to investors the value of Pangaea’s assets and how their money would be used – transferring the first $2.3 million raised in the offering directly to his own bank accounts and using it for his personal benefit.  DePalo also allegedly transferred investor funds to Gladtke, and sought to cover up their fraud by making misrepresentations to SEC examiners.

“We allege that DePalo and Gladtke sold overvalued interests in Pangaea and then raided investor funds for their own personal benefit,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “They later allegedly falsified records in an effort to cover up their scheme.”

In a parallel action, the New York County District Attorney’s Office today announced criminal charges against DePalo and Gladtke.

The SEC’s complaint filed in federal court in Manhattan charges DePalo and Gladtke with violating the antifraud and books-and-records provisions of the federal securities laws.  Also charged in the SEC’s complaint are Pangaea, the Arjent entities, and another entity owned and controlled by DePalo called Excalibur Asset Management.  The SEC also charged another principal at Arjent LLC named Gregg A. Lerman, who agreed to settle the charges.  Subject to court approval, Lerman is enjoined from future violations with any disgorgement and financial penalty amounts to be determined by the court at a later date.

The SEC’s investigation was conducted by Andrew Dean, Kerri Palen, Nathaniel Kolodny, Bennett Ellenbogen, and Lara Mehraban in the New York Regional Office.  The case was supervised by Amelia A. Cottrell, and the SEC’s litigation will be led by Michael Birnbaum and Mr. Dean.  The examination that preceded the investigation was led by Steven Vitulano, Terrence Bohan, Doreen Piccirillo, and Frank Sze of the New York office.  The SEC appreciates the assistance of the New York County District Attorney’s Office, Financial Industry Regulatory Authority, Financial Conduct Authority in the United Kingdom, City of London Police, and Northumbria Police.