Two former tech startup executives have been charged with conning investors out of more than $5 million by misrepresenting that they owned valuable warrants to purchase stock in mobile security products provider eAgency.
According to New Jersey regulators, James Trolice of New Jersey and Nevada resident Lee Vaccaro perpetrated a “pure scam” to induce at least 100 New Jersey residents to invest in four limited liability companies they controlled and which they claimed held millions of dollars of eAgency warrants.
In reality, the New Jersey Bureau of Securities said, they did not own anywhere near the amount of warrants they claimed and used their investors’ money to fund their “extravagant lifestyles.” Vaccaro allegedly spent at least $250,000 at Las Vegas casinos.
The Bureau on Wednesday ordered Trolice and Vaccaro to pay civil penalties of $2.5 million and $1.5 million, respectively. They are also facing a civil complaint filed by the U.S. Securities and Exchange Commission, and Vaccaro was arrested Wednesday on federal criminal charges.
“We allege that Trolice and Vaccaro lied to investors about the nature of the investment, created a phony aura of success, and ultimately funded their own lifestyles rather than investing all the money as promised,” Andrew M. Calamari, director of the SEC’s New York regional office, said in a news release.
Trolice served as president and chief marketing officer of eAgency from May 2006 to February 2007, while Vaccaro was chief marketing officer from July 2009 to October 2013. They both acted as consultants and “finders” for the company and were compensated occasionally with grants of stock warrants.
As finders, regulators said, Trolice and Vaccaro solicited investors to acquire an interest in one of their companies, falsely representing that eAgency was no longer accepting direct investments.
According to the SEC, Trolice hosted elaborate investor parties at his multimillion-dollar home in Alpine, N.J.
The New Jersey Bureau also fined former stockbroker Patrick Mackaronis $140,000, alleging he participated in the scheme by soliciting investors for Trolice. “The defendants’ conduct was a pure scam that preyed upon unsophisticated investors hoping to secure guaranteed returns in a short period of time,” Bureau Chief Laura H. Posner said.