An investment advisor accused of operating a pyramid-style investment scam has been charged by the US regulator, while a separate authority also has brought charges against the man.

The Securities and Exchange Commission yesterday charged a Westchester, New York-based investment advisor with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme.

The regulator alleges that, starting in approximately 2010, Michael Scronic began to raise money from at least 42 friends and acquaintances, many of whom were from his suburban community, in order to invest in a risky options trading strategy. 

In a statement, the SEC went on to state that Scronic allegedly lured investors by telling them that he had a long and impressive track record of proven returns; he allegedly lied to investors about the liquidity of investments, telling one investor that "what's cool about my fund is that i'm [sic] only in publicly traded options and cash so any redemptions are met within two business days so if you do need to withdraw for your business needs it will be quick and painless." 

In fact, Scronic was actually sustaining massive trading losses, with at least $15 million in investment losses since April 2010, the SEC claims. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475 while the balance in his brokerage account on June 30, 2017 was just under $27,500.

When some people tried to redeem investments, Scronic did not say he could not repay them. Rather, he allegedly provided investors with a steady stream of implausible excuses for why he could not pay them back. In other cases, he tried to obtain additional investment funds from new and existing investors so that he could pay other investors.

"Scronic's alleged scheme is just another example of a so-called investment professional acting as fiduciary, but failing to deal honestly with his investors for his own financial benefit," said Lara S Mehraban, Associate Regional Director of the SEC's New York Regional Office. "Investors should be wary anytime they are promised high or consistently positive returns in a complex, hard to understand investment strategy,” she said. 

The SEC also alleges that Scronic began identifying himself as an investment adviser to a fictitious hedge fund in which he purported to sell interests, or "shares." 

In a parallel action, the US Attorney's Office for the Southern District of New York today announced criminal charges against Scronic.