Clients of an advisor accused of fraud filed a lawsuit Wednesday against TD Ameritrade and Charles Schwab Corp. that claims the custodians helped facilitate the wrongdoing.
The class-action claim was filed by six former clients of Angelo A. Alleca, an Atlanta-based advisor and owner of Summit Wealth Management Inc., who was barred by the SEC in 2012 for misappropriating client assets.
The custodians collected false values on hedge funds Alleca ran and used that information on account statements, the lawsuit says, “thereby misrepresenting the integrity of the investments in what was, in reality, a Ponzi scheme.” Five of the plaintiffs say they lost about $2.2 million in the fraud when their assets were custodied at TD Ameritrade, and one plaintiff claims he lost $25,000 when his assets were at Schwab.
The claim, filed in the U.S. District Court, Northern District of Georgia, does not specify damages. The lawsuit says Alleca ended his relationship with Schwab in 2009 when Schwab would no longer let him provide valuations for a fund he managed. At that point, Alleca moved his assets to TD Ameritrade, the claim says.
“Our goal is to recover what we can and hold the two broker-dealers accountable for their alleged misconduct in this case,” said Badge Humphries, a lawyer at Motley Rice LLC law firm in Mt. Pleasant, S.C., which represents the investors.
TD Ameritrade spokeswoman Kristin Petrick declined comment. Schwab spokesman Greg Gable, in an e-mail, said Schwab believes “the suit has no merit.”
In 2012, Alleca incurred large losses in a $500 million fund he ran, the SEC claimed, and then set up additional hedge funds to raise money to cover his losses, “in a Ponzi-like fashion in order to meet redemption requests in [his main] fund.” The agency accused Alleca of misappropriating a total of $17 million.
One of the hedge funds, Detroit Memorial Partners LLC, set up by an Alleca business associate named Mark Morrow, raised money purportedly to buy cemeteries in Michigan. But the money was diverted instead.

Alleca’s firm sold approximately $9.5 million worth of Detroit Memorial promissory notes to investors, the SEC alleged in a separate action against Morrow. That money was later transferred to Alleca, who then lost more than $5 million of the note proceeds in “risky, short-term equity trading” in January 2008, the SEC said.

Alleca consented to the SEC’s action against him without admitting or denying any of the allegations. He has not been criminally charged in the case.

In 2010 and 2011, Schwab paid about $7.7 million to settle a similar class action, which arose from a fraud carried out by Al Parish, a former Charleston Southern University economics professor. The Motley Rice law firm represented plaintiffs in that matter as well.