On October 5, 2009 the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (Order) against Frank DiPascali, Jr. DiPascali, 52, a resident of Bridgewater, New Jersey, had been an employee of Bernard L. Madoff Investment Securities LLC (BMIS) since 1975. BMIS, founded in 1960, was a broker-dealer and investment adviser registered with the Commission that purportedly engaged in three different operations: investment adviser services, market-making services, and proprietary trading. Since from at least the early 1990s, DiPascali was involved in and eventually oversaw the bulk of the investment adviser services at BMIS.
The Order further finds that on Aug. 13, 2009, the District Court entered a Partial Judgment on Consent Imposing Permanent Injunction against DiPascali permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933; and violations, or aiding and abetting violations, of Section 10(b), 15(c) and 17(a) of the Exchange Act and Rules 10b-3, 10b-5 and 17a-3 thereunder, and Sections 204, 206(1) and 206(2) of the Advisers Act, and Rule 204-2 thereunder, in the civil action entitled Securities and Exchange Commission v. Frank DiPascali, Jr., 09 CV. 7085 (LLS), in the United States District Court for the Southern District of New York. The Commission’s complaint charged DiPascali with securities fraud for overseeing the mechanics of BMIS’ entirely fictitious investment strategy and creating millions of phony documents and trading records to conceal the fraud from regulators and investors.
On Aug. 11, 2009, DiPascali pleaded guilty to ten felony counts contained in a Criminal Information, United States v. DiPascali, 09 Cr. 764 (RJS), filed in the District Court by the United States Attorney’s Office for the Southern District of New York. The Criminal Information against DiPascali contained many of the same factual allegations as those in the Commission’s Complaint. That same day, DiPascali, pleaded guilty to conspiracy, securities fraud, investment adviser fraud, falsifying records of a broker-dealer, falsifying records of an investment adviser, mail fraud, wire fraud, international money laundering, perjury, and attempting to evade federal income taxes. DiPascali faces a statutory maximum sentence of 125 years in prison. He is also subject to mandatory restitution and faces criminal fines up to twice the gross gain or loss derived from the offense. Additionally, the Criminal Information to which DiPascali pleaded guilty includes forfeiture allegations that would require DiPascali to forfeit the proceeds of the charged crimes, as well as all property involved in the money laundering offenses and all property traceable to such property. The District Court remanded DiPascali and set a sentencing control date for May 15, 2010.
Based on the above, the Order bars DiPascali from association with any broker, dealer, or investment adviser. DiPascali consented to the issuance of the Order without admitting or denying any of the findings, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings, and the entry of the injunction and his guilty plea. (Rels. 34-60787; IA-2931; File No. 3-13639).
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