Former Broker Pleads Guilty in Castleberry Financial Fraud

Scott P. Strochak, an ex-broker, has pleaded guilty to criminal charges related to his involvement in the $3.8M Castleberry Financial Services Fraud. He is also now facing parallel civil fraud charges brought by the US Securities and Exchange Commission (SEC).

Prosecutors charged Strochak, who was the Director of Alternative Investments and a Senior EVP at Castleberry Financial Services Group, and two other firm executives earlier this year over the scam, which promised 8-12% yearly returns on bond-like investments while touting a robust business that was handling hundreds of millions of dollars in capital and had over 300 investors. The fraud raised almost $3.8M from at least 17 investors.

According to the SEC, Strochak, former Castleberry CEO Norman Strell, and ex-President T. Johnathan Turner made misrepresentations to prospective investors, including that its investments were insured and bonded by top insurers like Chubb Group and CNA Financial Group. They allegedly continued to make these representations even after some investors complained that they never received evidence of said insurance.

The regulator, in its broker fraud case, is also accusing Strochak of making misrepresentations about the profitability of Castleberry even while purportedly knowing that, because there weren’t enough funds, the firm had refused to give back investors’ principal when some of them had asked. Strochak was unregistered with the SEC at the time that he acted as Castleberry’s sales agent.

Claiming to be an alternative investment firm, Castleberry falsely claimed that it was heavily invested in hundreds of real estate properties and local businesses in Florida and was making tens of million of dollars in revenue. Earlier this year, the SEC filed an emergency action for an asset freeze.

The Commission also filed fraud charges against Strell, Turner, and the firm. The two former Castleberry executives allegedly misappropriated investor money for their own personal spending and other businesses they operated, as well as gave some of the funds to family members. Turner died in jail earlier this month while awaiting his trial on related criminal charges.

Strochak, specifically, is accused of raising $2.1M from at least seven of the investors to whom he sold the private placement offerings. He was paid $245K for the sales, including at least $48K in commissions.

Some of those whom Strochak solicited were former clients from previous jobs. He also went looking for new investors by networking, holding group solicitations, through phone and e-communications, and by providing Castleberry offering materials through the firm’s website.

With some 15 years working in the securities industry, Strochak was previously a registered Morgan Stanley (MS) broker from 2009 until 2015, Before that he was a registered broker with Merrill Lynch Pierce, Fenner and Smith, Neuberger Berman, Suntrust Equitable Securities, , Integrated Resources Equity, and W. H. Newbold’s Sons & Co. The Financial Industry Regulatory Authority (FINRA) suspended Strochak in 2016 after he didn’t comply with two arbitration awards.

Castleberry Investor Fraud
If you are an investor that was defrauded in the Castleberry Financial Services scam, contact our broker fraud lawyers at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today to request your free, no obligation case consultation.