The allegations read: The securities and exchange commission (the "commission" or "sec") alleges that this case concerns the unregistered complete business solutions group ("cbsg") securities offering, which raised more than $500 million from investors nationwide through a network of so-called "agent fund managers" who operated their own securities offerings in an orchestrated effort to funnel investor money to cbsg in exchange for cbsg promissory notes.
defendants shannon westhead ("westhead"), alec vagnozzi, albert vagnozzi, and michael tierney ("tierney") were agent fund managers until july 2020, when the sec filed an enforcement action against cbsg and others for violating the registration and anti-fraud provisions of the federal securities laws, resulting in a temporary restraining order and the appointment of a receiver over cbsg.
specifically, from no later than september 2019 through at least march 2020, defendants westhead and alec vagnozzi operated the agent fund pisces income fund, llc ("pisces"), which they formed for the purpose of raising investor money for the unregistered cbsg offering. Through pisces, westhead and alec vagnozzi raised more than $15 million for cbsg through the offer and sale of pisces promissory notes to at least 80 investors, and then funneled the investors' money to cbsg for the purchase of cbsg promissory notes issued to pisces.
similarly, from no later than may 2018 through at least march 2020, defendant albert vagnozzi operated the agent fund capricorn income fund i, llc ("capricorn"), which albert vagnozzi formed for the purpose of raising investor funds for the unregistered cbsg offering. Through capricorn, albert vagnozzi raised more than $18 million from at least 110 investors and then funneled the investors' money to cbsg for the purchase of cbsg promissory notes issued to capricorn.
likewise, from no later than january 2019 through at least march 2020, defendant tierney tierney operated merchant services income fund, llc ("msi"), which tierney formed for the purpose of raising investor funds for the unregistered cbsg offering. Through msi, tierney raised more than $32 million from at least 70 investors and then funneled the investors' money to cbsg for the purchase of cbsg promissory notes issued to msi.
in exchange for raising investor money in the unregistered cbsg offering, cbsg compensated the defendants by paying them transaction-based compensation based on a percentage of every dollar the defendants funneled to cbsg for the purchase of cbsg notes.
to lure investors, defendants made a series of misrepresentations and omissions to investors, including touting cbsg's success while omitting to disclose the criminal record of cbsg's principal, joseph laforte, who had two felony convictions, and failing to disclose regulatory actions against cbsg by pennsylvania, texas, and new jersey state securities regulators.
in april 2020, westhead, alec vagnozzi, albert vagnozzi, and tierney formed new agent funds. Specifically, westhead and alec vagnozzi formed defendant pisces income fund parallel, llc ("pisces parallel"), albert vagnozzi formed defendant capricorn income fund parallel ("capricorn parallel"), and tierney formed defendant merchant services income fund parallel, llc ("msi parallel") (collectively, the "parallel agent funds").
in march 2020, westhead, alec vagnozzi, albert vagnozzi, and tierney notified investors that because of the covid-19 pandemic, cbsg would default on the notes cbsg had issued to the agent funds. Westhead, alec vagnozzi, albert vagnozzi, and tierney offered their existing investors promissory notes issued by the parallel agent funds, which would replace the promissory notes pisces, capricorn, and msi had issued to investors. Under the parallel agent funds' notes, investors received lower investment returns. Nearly all investors participated in the parallel agent fund offerings.
