Enforcement News: SEC Charges Ticket Seller With Fraud In Connection With Resale of Tickets to Broadway Shows and a Sporting Event

• Posted on: May 6 2019

On April 29, 2019, the Securities and Exchange Commission (“SEC”) announced (here) that it filed charges against a New York City man for continuing a previously charged ticket resale scheme, in which investors were falsely promised that their funds would be used for the purchase and resale of tickets to Broadway shows and a sporting event. According to the SEC, at least 12 investors were defrauded out of approximately $2.7 million as a result of the scam.

According to the SEC’s complaint (here), James Siniscalchi (“Siniscalchi”), Chief Compliance Officer of a company that claimed to have special access to profitable and highly sought-after event tickets (“Entertainment Company”), knowingly misused investor money to benefit himself and his extended family. The SEC alleged that Siniscalchi and his business partners rebranded businesses formerly run by his cousin, Joseph Meli (“Meli”), who settled fraud charges with the SEC (here) and pleaded guilty to securities fraud in a parallel criminal action (here), and that this rebranding was done with Meli’s knowledge and assistance.

Following Meli’s arrest, Siniscalchi and his business partners allegedly raised approximately $2.7 million net from investors. According to the SEC, investors were promised that their money would be used only to purchase tickets on the secondary market to events such as the Broadway shows Harry Potter and the Cursed Child, Hello Dolly, and Bruce Springsteen on Broadway, and a professional boxing match between Floyd Mayweather Jr. and Conor McGregor. In actuality, alleged the SEC, Siniscalchi misused investor funds to benefit himself, Meli, and his family. The SEC alleged that Siniscalchi took steps to conceal from investors Meli’s involvement given the widely publicized civil and criminal cases that were then pending against Meli. To hide Meli’s role in the alleged fraud, Siniscalchi purportedly instructed staff not to include Meli on emails to investors, and referred to Meli as “Keyser Soze,” in reference to a fictional movie character from the movie The Usual Suspects who secretly operated as a crime kingpin.

“As alleged in our complaint, investors were lured in with promises of big profits, but Siniscalchi really just took over his cousin’s fraudulent scheme to steal money,” said Paul Levenson, Director of the SEC’s Boston Regional Office.

The SEC filed its complaint in the U.S. District Court for the Southern District of New York. The Commission charged Siniscalchi with violating the antifraud provisions of the federal securities laws and sought a permanent injunction from future violations, disgorgement of allegedly ill-gotten gains, with interest, and financial penalties.

In addition to the SEC, the U.S. Attorney’s Office for the Southern District of New York filed criminal charges against Siniscalchi and Meli (here). In that regard, Siniscalchi and Meli were charged with securities fraud, wire fraud, and conspiracy to commit securities and wire fraud, stemming from their participation in the alleged fraudulent ticket investment scheme.

U.S. Attorney Geoffrey S. Berman said: “As alleged, Joseph Meli and James Siniscalchi engaged in a scheme to defraud investors by lying about purported access to blocks of Broadway tickets.  As alleged, the acting was all done by the defendants, who posed as legitimate businessmen but appropriated the money they said would be invested in theatre tickets.”

If convicted, the conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense; the securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense; and the wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

The SEC action, SEC v. James Siniscalchi, Case 1:19-cv-03792 (S.D.N.Y. Apr. 29, 2019), can be found here.

The DOJ action, U.S. v. Meli et al., 19 MAG 4079 (S.D.N.Y.), can be found here.

Tagged with: SEC, SEC Enforcement Proceedings, Securities, Securities and Exchange Commission, Securities Fraud