SEC Charges Barrington Man with Fraud for Alleged Ponzi Scheme

A Barrington man and owner of Providence-based ClearPath Wealth Management has been charged with fraud for operating an alleged ponzi scheme that has wiped out at least $11 million of investors’ money and enabled him to buy his $2.5 million waterfront home.

According to the complaint, Churchville and ClearPath “diverted deposits from new investors to pay prior investors, used proceeds from selling particular investments to pay unrelated investors, used investors’ funds as collateral for loans to make investments for their own benefit, used other investors’ money to repay the loans, converted investor funds into investments for ClearPath’s own benefit, and stole $2.5 million of investor funds to purchase Churchville’s waterfront home in Barrington, Rhode Island,” the SEC said in a release.

To conceal the fraud, Churchville and ClearPath deceived investors and used misleading accounting tricks “to conceal their fraud from auditors, accountants, fund administrators, and their own staff.”

When ClearPath investors started asking for disbursement of investments in 2013, Churchville tried to prolong the scheme by lying to investors about the status and worth of those investments all the while lulling them with assurances that their money was safe.

The SEC’s complaint charges ClearPath and Churchville with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8 thereunder. The complaint further charges ClearPath with violating Rules 206(4)-2 and 206(4)-7 under the Advisers Act, and charges Churchville with aiding and abetting ClearPath’s violations of those rules. The SEC seeks to require ClearPath and Churchville to return their allegedly ill-gotten gains with interest and to pay civil monetary penalties. The SEC also seeks preliminary and permanent injunctions against both defendants.

Four other entities - ClearPath Multi-Strategy Fund I, L.P., ClearPath Multi-Strategy Fund II, L.P., ClearPath Multi-Strategy Fund III, L.P., and HCR Value Fund, L.P. - are named in the Commission’s complaint as relief defendants based on their receipt of investor funds. The SEC is seeking an order requiring that these entities disgorge their ill-gotten gains.

The Commission has also sought leave to intervene in a state court action in order to preserve funds allegedly misappropriated by ClearPath and Churchville and to promote the equitable distribution of funds to harmed ClearPath investors.