The wages of fraud keep piling up on fake hedge fund manager Michael Scronic.
From 2010 to 2017, his fictitious Scronic Macro Fund raked in millions of dollars and enabled him to live a lavish lifestyle.
In the last year, however, his luck and ill-gotten gains have run out.
First he was arrested for securities fraud, then his wife divorced him. Last month he pled guilty in federal court and agreed to forfeit more than $22 million.
Now Scronic has consented to a civil judgment with the U.S. Securities and Exchange Commission that permanently prohibits him from using any “device, scheme or artifice” in the purchase or sale of securities. He may have to pay another penalty, as U.S. District Judge Cathy Seibel gave the SEC the option to file an order for “disgorgement of ill-gotten gains.”
Scronic, 46, ran the unregistered fund from his home – a 6,817-square-foot house and 10-acre property in Pound Ridge – that he rented for $12,275 a month. He charged a 1 percent fee for assets under management and 20 percent of profits, but the profits were a mirage, according to court records.
Scronic had put investors’ money into his personal brokerage account and traded in risky options contracts. He lost money in all but one quarter for five-and-a-half years.
When he told investors last year that the fund had $21.7 million in assets, his brokerage and bank accounts actually had $102,376.
“Despite the fact that the fund continually lost money,” Scronic testified at his change-of-plea hearing last month, “I fraudulently represented to my investors that the fund was making money and that they were generating profits.”
Forty-five people lost more than $22 million on the Scronic Macro Fund. Scronic had spent more than $500,000 a year on personal expenses, including $15,000 a month on credit card charges, multiple beach and country club memberships and a vacation home in Stratton Springs, Vermont.
Seibel is scheduled to sentence Scronic on the criminal charge on July 9. The maximum sentence for the securities fraud charge is 20 years.