Fraud charges laid by SEC and NY District Attorney

Giacchetto’s client roster has included a crop of young Hollywood stars such as Leonardo DiCaprio, Claire Danes, Ben Affleck and Matt Damon. Giacchetto, 37, runs the Cassandra Group Inc., a New York-based investment adviser.

The SEC alleges that Giacchetto targeted the entertainment industry claiming that he follows a conservative investment strategy and doesn’t hold client assets directly. Instead the SEC says, he took possession of at least US$20 million in client funds, investing some of it, but diverting US$4 million to pay the firm’s expenses, his own living expenses. He also paid off other clients “who had been defrauded earlier in the scheme”, and US$12,000 allegedly went as a down payment on a Mercedes for a law enforcement officer, the SEC alleges.

The DA alleges that Giacchetto stole money by directing Cassandra’s custodian, Brown & Co., to issue cheques to assorted clients, but the cheques were delivered to Cassandra rather than the clients. He then endorsed the cheques to himself and deposited them in Cassandra’s corporate accounts.

The firm has recently been hit with controversy as clients complained about sub-par investment performance. The DA now alleges that “as some clients began to question activity in their accounts, Cassandra became little more than a giant asset-kiting scheme, as Giacchetto paid complaining clients with funds stolen from other clients.”

The SEC says that Giacchetto lied to clients to conceal his activities, claiming that he had invested the disappeared money in non-existent bonds and private placements. The SEC says he also lied to commission investigators and produced falsified documents to the district attorney.

The SEC is seeking an immediate asset freeze, preliminary and permanent injunctions, disgorgement plus interest, and civil penalties.