Edelson Lechtzin LLP has commenced a class action lawsuit against Dean Vagnozzi, A Better Financial Plan, and certain affiliated persons and entities (Defendants), alleging violations of the federal Racketeer Influenced and Corruption Organizations Act (RICO), and state claims for negligent misrepresentation, breach of fiduciary duties, conspiracy, fraud, unjust enrichment, aiding and abetting fraud, and aiding and abetting breach of fiduciary duties, to recover millions of dollars' worth of investments by individuals who were fraudulently induced by Defendants to use their hard-earned savings to purchase unregistered securities backed by risky merchant cash advance loans to small businesses.
In order to carry out their fraudulent scheme, the Complaint alleges that Defendants created and disseminated false and misleading radio advertisements and engaged in deceptive in-person solicitations in order to persuade individuals to purchase merchant cash investments pursuant to false and misleading Private Placement Memoranda and Subscription Agreements with a series of Delaware companies that were formed and promoted by Defendants.
Dean Vagnozzi is well known in the Greater Philadelphia region for his ubiquitous AM radio advertisements promoting ABFP. However, these ads never mention that the investments they are peddling include unregistered securities that are backed by high risk merchant cash advance loans to small businesses that lack the creditworthiness to obtain conventional bank financing. While such merchant cash advance loans have high default rates, Defendants falsely represented that the ABFP merchant cash advance investments are safer than anything available on Wall Street, claiming:
Vagnozzi's radio advertisements don't mention that in May 2019, he agreed to pay a state-record $490,000 to settle charges by the Pennsylvania Department of Banking and Securities that he was selling securities without a license. They also fail to disclose to prospective investors that in February 2020, the Texas Securities Board issued an Emergency Cease-And-Desist Order against ABFP for violations of Texas securities laws in connection with its offer and sale of ABFP merchant cash advance investments.
On July 14, 2020, Vagnozzi was again fined by regulators. Specifically, Vagnozzi entered into a nearly $500,000 settlement with the SEC "for his offering and selling unregistered securities in violation of Section 5 of the Securities Act and acting as an unregistered broker-dealer in violation of Section 15(a) of the Exchange Act, in connection with the sale of securities," named Pillar 1 through 8, which are funds comprised of ownership interests in life settlement contracts.
The Complaint alleges that Vagnozzi would have been unable to carry out his fraudulent scheme without the assistance of lawyer, John Pauciulo of Eckert Seamans, who has advised Vagnozzi and ABFP for more than 15 years. ABFP marketing regularly touts its affiliation with Eckert Seamans, and the firm's key role in creating the ABFP investments, which lends an air of trustworthiness to these high risk, unregistered investment vehicles.
Defendants' scheme began to unravel in March 2020, when thousands of small businesses defaulted on the merchant cash loans underlying the investments sold by ABFP. Panic among ABFP investors ensued when the interest payments stopped in March 2020. In late March 2020, Vagnozzi admitted that the merchant cash lender, Par Funding, was insolvent. By the end of April 2020, Vagnozzi had fraudulently induced hundreds of investors to enter into a so-called Exchange Notes Offering, which will pay ABFP investors 4% interest, instead of the promised 10% interest, and the repayment of principal will be delayed from the promised 1-year term to 7 years. This deal is an unmitigated disaster for ABFP investors, who include elderly persons and others on fixed incomes.
If you wish to join this case, please click here to submit your information. The name of this case is Caputo v. Dean Vagnozzi, et al., No.: 1:20-cv-01042 (D. Del.). A copy of the Class Action Complaint can be found by clicking here.