Essex Capital Corporation Charged By SEC In $80 Million Fraud – Investor Recovery Options

shutterstock_94632238-300x214The attorneys at Gana Weinstein LLP are reviewing court documents and complaints related to The Securities and Exchange Commission’s (SEC) charge that an equipment leasing company – Essex Capital Corporation (Essex) – and its founder Ralph Iannelli (Iannelli) defrauded investors in connection with sales of over $80 million in promissory notes.

In the pleading the SEC called Iannelli a securities fraud recidivist and alleged that his Essex from 2014 through 2017 sold investments through the sale of promissory notes that paid typically 8.5% per annum. The SEC claimed that investor returns were supposed to be based on the strength of Essex’s equipment leasing model.  However, the SEC charged that between 2014 and 2017 Iannelli raised over $80 million from approximately 70 promissory note investors through materially false and misleading information.  The SEC claims that Iannelli protected only his own financial interests and siphoned millions out Essex to himself from 2014 to the present.

According to the SEC, Essex sold approximately $8.4 million in promissory notes to 21 Daniel Investment Associates (Daniel Investment) clients since 2014 and approximately $23.36 million from Granger Management LLC (Granger) since 2015.  Granger clients invested through a pooled investment fund.

Under the securities laws financial advisors must conduct due diligence and have a reasonable basis for their investment recommendations.  Common due diligence looks into the investment’s properties including its benefits, risks, tax consequences, the issuer, the likelihood of success or failure of the investment, and other relevant factors.  When dealing with alternative investments and private equity deals due diligence can be more challenging but firms are responsible to meet those heightened challenges prior to recommending the investment to its clients.

In the case of Essex, the SEC found that year after year the company’s operational revenues from the leasing business comprised only a small fraction of its incoming cash flows. Instead, the majority of Essex’s funds came from the sale of promissory notes to investors and bank loans.  From 2014 to 2016, the SEC alleged that approximately $107 million of Essex’s revenue came from investors and banks while only approximately $34.4 million came from equipment leasing income. Further, Essex is alleged to have sustained a staggering $32 million in operating losses from 2014 to 2016 due in part to Essex’s use of its revenues to pay back investors and banks instead of using it to purchase income generating equipment. To maintain Essex’s publicly facing success story, the SEC alleged that Essex resorted to a pattern and practice of making Ponzi-like payments since 2014 in order to keep the scheme alive.

Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation.  The attorneys at Gana LLP are experienced in representing investors in cases of financial advisors failing to conduct proper due diligence on investments.  Our consultations are free of charge and the firm is only compensated if you recover.

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