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The Department of Justice has charged an Orange County-based private equity CEO with defrauding more than 500 investors of $62.5M via an alleged promissory note scam that operated much like a Ponzi scheme.
From June 2020 to June 2024, Norada Capital Management CEO and founder Marco Santarelli got hundreds of investors across the country to invest in unsecured promissory notes ranging from $25K to $500K, according a release issued Tuesday by the U.S. Attorney's Office for the Central District of California.
Santarelli promised yields of approximately 12% to 15% over a three-to-seven-year horizon from investments in real estate, e-commerce, Broadway shows and cryptocurrency, and he framed his investments as easy, "passive" income, according to the DOJ.
Through an attorney, Santarelli declined to comment.
Santarelli allegedly told investors that the promissory notes were "backed by diversified assets under management and offered steady, predictable monthly returns" and provided balance sheets that put the total asset value between approximately $143M and $224M.
Those same balance sheets hid $90M in debt and included "inflated assets," the DOJ alleged. Any interest Santarelli paid to investors was made using money from new investors, according to federal prosecutors.
Unsecured notes don't involve collateral or property to back the debt, and in the event of failure to repay the debt, the lender has to hope that the borrower's assets will cover the amount lost.
Santarelli is charged with one count of wire fraud.
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