Investment Adviser Charged with Orchestrating Multi-Million Dollar Ponzi Scheme

(HedgeCo.Net) The U.S. District Court for the District of Rhode Island has entered its final judgment and a permanent injunction against Patrick Churchville, the owner and president of Rhode Island-based investment advisory firm ClearPath Wealth Management, LLC, for defrauding the funds they advised as well as the investors in those funds.

Prior to the entry of the permanent injunction, Churchville and ClearPath were subject to a preliminary injunction and asset freeze entered by the court in the SEC’s action, which was filed on May 7, 2015. According to the SEC’s amended complaint, from at least December 2010, Churchville‘s and ClearPath’s fraudulent conduct caused at least $27 million in losses to the private funds they advised and controlled. Churchville and ClearPath misallocated and misappropriated investor assets, used fund assets to secure undisclosed borrowing that they repaid with monies due to investors, stole approximately $2.5 million of investors’ funds to purchase Churchville’s waterfront home, and engaged in a multi-million dollar Ponzi scheme, using investor money to pay off a series of prior investments. In July 2015, the court appointed a receiver to marshal assets of the two defendants as well as the assets of the private funds advised by Churchville and ClearPath, for the benefit of harmed investors. The receiver’s work continues. On March 16, 2017, Churchville was sentenced to 7 years in federal prison following his guilty plea to five counts of wire fraud and one count of tax evasion in connection with orchestrating the Ponzi scheme and misappropriating additional money from funds he advised.

The final judgment permanently enjoins Churchville from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Sections 206(1) and (2) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, as well as the custody and compliance provisions of Rule 206(4)-2 and Rule 206(4)-7 thereunder. The final judgment also orders him to pay $29,103,738 in disgorgement and $4,577,810 in prejudgment interest, as well as a $225,000 civil penalty.

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