Meridian Capital Founder Pleads Guilty to Conspiring to Commit Fraud

The founder of New York-based Meridian Capital Asset Management, John Geraci, pled guilty in Manhattan federal court to conspiring to commit securities and wire fraud, according to the US Attorney’s Office for the Southern District of New York (SDNY).

The guilty plea stems from Geraci’s arrest in July of 2018 on charges of investment adviser fraud, securities fraud, wire fraud, and conspiracy in connection with a scheme to defraud clients of his company.

At the same time Geraci was arrested, the SEC charged him with fraud and accused him of “perpetuating lies about his portfolio manager’s investment performance and assets under management, and for stealing approximately $1 million of client funds.”

According to the SEC and SDNY Geraci formed the Meridian Matrix Long Short Equity Fund in 2015. Hiring Nicholas Mitsakos and his company Matrix Capital Markets as the fund’s portfolio manager. Mitsakos told Geraci that Matrix had tens of millions of dollars under management and had earned annual returns of between 19.4% and 66.3% from 2012 to 2014.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

Geraci and Mitsakos entered into an arrangement in which Geraci would raise money for Mitsakos, who would manage that money through a new vehicle, the Meridian Matrix Fund, and the two would then split any fees that the Meridian Matrix Fund generated.

The SEC’s complaint alleged that rather than verifying Mitsakos’ claims, Geraci used Mitsakos’ false and unsubstantiated claims to market his fund, and eventually obtained $2 million from the two investors, known in court documents only as “Victim 1” and “Victim 2,” to invest in the Meridian Matrix Fund.

Mitsakos used $1.2 of that amount to buy and sell securities, and used the remaining $800,000 on business expenses and personal expenses, such as car payments, credit cards, and his rent. The $1.2 million that he did invest resulted in significant losses, according to the SEC.

Despite eventually learning of Mitsakos’ deceptionGeraci continued to market the fund and to let Mitsakos trade the clients’ assets.

Mitsakos pled guilty to conspiring to commit securities fraud and wire fraud, and in November of 2017 was sentenced to 30 months in prison, and two years of supervised release. Geraci will be sentenced on Jan. 23, 2020.