A former registered broker was charged with engaging in a fraudulent scheme that raised nearly $3.8 million from at least 17 retail investors before it was halted by the Securities and Exchange Commission when it filed an emergency action against Castleberry Financial Services Group, LLC., and its leaders, one of whom is a convicted felon.
The SEC complaint said Scott P. Strochak, 58, of Boca Raton, Fla., acted as an unregistered broker for the South Florida-based Castleberry and directly solicited prospective investors to invest in Castleberry’s funds based on false representations. This happened from February 2018 through in or about February 2019, the SEC said.
The complaint said Castleberry, headed by president T. Jonathon Turner and its CEO Norman M. Strell, purported to be a successful “Alternative Investment Manager,’’ and claimed it had hundreds of millions o dollars in capital invested in local businesses and a portfolio of hundreds of real estate properties that generated tens of millions of dollars in revenue annually.
Castleberry also professed that its investments were bonded and insured by leading insurance companies such as CNA Surety (“CNA”) and Chubb Group of Companies (“Chubb”).
Despite knowing the falsity of these claims, the complaint said Strochak misrepresented Castleberry to investors and featured them in his investor solicitations. Strochak also allegedly misrepresented Castleberry's profitability, despite knowing that Castleberry denied some investors' requests to withdraw their principal due to insufficient funds, the complaint said.
It further alleged that Strochak was reckless in repeating Castleberry's false claims that it had grown by $600 million in capital and 300 investors in 2018, when he knew that, as the sole sales agent until December 2018, he had brought in only about $2 million from about seven investors that year.
The complaint said Strochak received more than $245,000, including at least $48,000 in sales commissions, from Castleberry through his fraudulent conduct.
At the time of the conduct, the SEC said Strochak was the senior executive vice president and director of Alternative Investments of Castleberry. He had previously worked for Morgan Stanley and Merrill Lynch among other companies.
In a parallel criminal action, the U.S. Attorney's Office for the Southern District of Florida criminally charged Turner, Strell and Strochak in May 2019. Strochak pleaded guilty on August 16, 2019, and is awaiting sentencing.
Turner, a felon, was previously convicted of multiple fraud, theft and forgery felonies and was imprisoned from 1998 to 2016.