Mark Varacchi

Mark J. Varacchi is an American federal prison consultant, public speaker, and former hedge fund executive who served 15 months in federal prison after pleading guilty in 2017 to conspiracy, securities fraud, and wire fraud charges in the Southern District of New York. Varacchi was the founder of Sentinel Growth Fund Management LLC and managed the Radar Alternative Fund LP and Radar Alternative Master Fund SPC, through which he and co-conspirators operated a hedge fund Ponzi scheme that defrauded investors of at least $3.95 million. After cooperating with federal investigators and serving his sentence, Varacchi founded Federal Prison Consultancy LLC and became a public speaker on fraud prevention, compliance, and ethics for financial institutions and professional organizations.

Summary

Mark Varacchi spent over 20 years in the hedge fund and private equity industry, serving in roles including Chief Operating Officer and Chief Compliance Officer, where he was responsible for building systems, processes, and software to identify risks and flaws in investment operations. In 2017, he was charged with using those same skills to circumvent the systems he had built, commingling investor assets, manipulating account balances and returns, and misappropriating funds in a scheme connected to the broader "Hamilton" ticket fraud that involved multiple co-conspirators. Varacchi cooperated extensively with federal prosecutors, serving as a cooperating witness in related prosecutions, before serving his own sentence. He now operates Federal Prison Consultancy, which guides defendants and their families through the federal criminal justice process, and speaks to compliance professionals about fraud detection and prevention.

Background

Varacchi earned a Bachelor of Science in Finance and Banking from the University of Bridgeport between 1987 and 1991.

Following his education, Varacchi built a career in the hedge fund and private equity industry spanning more than two decades. He served in senior operational and compliance roles, including positions as Chief Executive Officer, Chief Operating Officer, and Chief Compliance Officer at various investment management firms. His responsibilities included building systems, processes, and software for investment operations, as well as conducting due diligence to identify flaws and risks in those systems.

Prior to founding Sentinel Growth Fund Management, Varacchi worked for several firms including positions at Atlas Construction and in various consulting roles. He resided in Norwalk, Connecticut during the period of his criminal conduct.

Federal Indictment and Prosecution

On February 1, 2017, Varacchi pleaded guilty in the Southern District of New York to conspiracy to commit securities fraud and wire fraud, securities fraud, and wire fraud. The following day, the U.S. Securities and Exchange Commission filed a civil complaint against Varacchi, Sentinel Growth Fund Management LLC, and two hedge funds managed by the firm—Radar Alternative Fund LP and Radar Alternative Master Fund SPC—alleging violations of federal securities laws.

Criminal Charges

The criminal information filed in federal court charged Varacchi with conduct overlapping with the SEC's civil allegations. The charges stemmed from his operation of Sentinel Growth Fund Management and the Radar Alternative funds, which raised money from investors purportedly to allocate to up-and-coming hedge fund managers.

Varacchi pleaded guilty to:

• Conspiracy to commit securities fraud and wire fraud
• Securities fraud
• Wire fraud

Fraudulent Scheme

According to prosecutors and the SEC, Varacchi and Sentinel Growth Fund Management misrepresented to investors that money deposited with the firm would be allocated to emerging hedge fund managers for investment purposes. Instead, Varacchi and the firm did not transfer all the money as promised, "instead commingling investor assets and manipulating account activity, account balances, and investment returns as part of a scheme to siphon away investor funds."

Varacchi and his firm allegedly stole at least $3.95 million from investors, including more than $1 million to settle litigation brought by Varacchi's prior employer. The SEC characterized the operation as a Ponzi scheme.

Sentinel Growth Fund Management was not registered with the SEC or any state as an investment adviser, as required by law.

Connection to "Hamilton" Ticket Fraud

Varacchi's guilty plea revealed his connection to a broader scheme involving the fraudulent sale of tickets to popular Broadway shows, including the blockbuster musical "Hamilton," as well as concerts by performers such as Adele, Katy Perry, and Justin Bieber.

After pleading guilty, Varacchi cooperated with federal investigators. He admitted to authorities that he, Steven Simmons of Wilton, Connecticut, and Joseph Meli had participated in a hedge fund scheme that raised money from investors to purportedly buy and resell tickets for hit shows. Varacchi served as a cooperating witness and informant for the government, including wearing a wire to record conversations with co-conspirators.

According to court filings in Meli's case, the government directed Varacchi to "surreptitiously record" Meli outside the presence of his attorneys in January 2017, recording conversations that prosecutors used as evidence of guilt.

Related Prosecutions

Varacchi's cooperation led to prosecutions of several co-conspirators:

• Steven Simmons of Wilton, Connecticut pleaded guilty to conspiracy and was sentenced to 37 months in prison in April 2018, ordered to forfeit $6.9 million, and required to pay restitution to victims.

• Joseph Meli of New York pleaded guilty to one count of securities fraud in November 2017 after initially facing multiple charges. He was sentenced to 6.5 years in prison in April 2018 and ordered to forfeit more than $104 million.

• Jason Rhodes, another founder of Sentinel, was charged in October 2018 with defrauding 25 investors of more than $19 million. Federal agents relied on interviews with Varacchi to build the case against Rhodes.

SEC Civil Action

On February 3, 2017, the SEC obtained an asset freeze and other preliminary injunctive relief against Sentinel, Varacchi, and the Radar Funds. On May 1, 2017, the U.S. District Court for the District of Connecticut entered judgment against Varacchi and Sentinel Growth Fund Management. The court also appointed a receiver to oversee assets of Sentinel and the Radar Funds.

The judgment permanently enjoined Sentinel and Varacchi from violating Section 10(b) of the Securities Exchange Act of 1934, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940.

Varacchi consented to an SEC order barring him from the securities industry.

Statement from SEC

Anthony S. Kelly, Co-Chief of the SEC Enforcement Division's Asset Management Unit, stated at the time of the complaint: "As alleged in our complaint, Varacchi promised investors that their money would be routed to up-and-coming hedge fund managers when in reality he was diverting significant portions for personal use and unauthorized business expenses."

Sentencing and Prison Experience

Following his guilty plea and cooperation with federal authorities, Varacchi was sentenced to serve 15 months in federal prison. The sentence reflected credit for his substantial assistance to prosecutors in building cases against co-conspirators.

Varacchi has described his experience preparing for and serving his sentence as formative to his subsequent career. He has stated that he "pled guilty—because I was guilty" and "chose to face it head-on," preparing his family, focusing on education and insight, and helping other inmates from inside.

Details regarding the specific federal facilities where Varacchi served his sentence have not been publicly disclosed.

Post-Release Career

Following his release from federal prison, Varacchi founded Federal Prison Consultancy LLC, where he works with defendants and their families to prepare for and navigate the federal criminal justice process.

Prison Consulting Services

Federal Prison Consultancy provides comprehensive services for individuals facing federal charges and incarceration, including:

• Presentence Investigation (PSI) Preparation: Guidance on the presentence investigation process and how to present information favorably to probation officers
• Cooperation Strategy: Advice on decisions regarding cooperation with prosecutors
• Prison Designation Preparation: Assistance with seeking appropriate facility placement based on security level, medical needs, and geographic preferences
• Family Readiness: Preparation and support for families dealing with a loved one's incarceration
• Policy Review: Analysis of policies that can reduce time served, including the First Step Act, Second Chance Act, and other programs
• Account Setup: Assistance with email, phone, commissary, and trust account setup
• Medical Review: Medical record review and prescription evaluation to ensure continuity of care

Varacchi emphasizes that his firm addresses "what your lawyer didn't learn in law school," focusing on practical aspects of incarceration that fall outside traditional legal expertise.

Public Speaking

Varacchi has developed a second career as a public speaker on fraud prevention, compliance, and ethics. He delivers keynote speeches to compliance professionals, financial institutions, investigative teams, law enforcement, and professional organizations including the Association of Certified Fraud Examiners (ACFE).

His presentations focus on:

• Real-world techniques still being used to bypass controls and commit financial fraud
• Vulnerabilities in systems and processes that enable fraud
• Game theory and behavioral risk factors
• The future impact of artificial intelligence on financial crime
• Anti-money laundering (AML) and Know Your Customer (KYC) compliance

Varacchi describes his approach as showing organizations "the Flintstones to the Jetsons of fraud detection," explaining how old fraud techniques persist while new technologies create both risks and opportunities for prevention.

Unique Research

Varacchi has conducted extensive interviews with incarcerated individuals convicted of financial crimes, compiling data and identifying patterns that he states have "never been seen in the industry." He notes that his access to fraudsters, both as a fellow inmate and through hundreds of client interviews at Federal Prison Consultancy, has allowed him to ask questions and compile information that industry professionals have not previously had access to obtain.

Public Statements

Varacchi has been transparent about his crimes and their impact on his perspective. He has stated that he "identified that I spent my career building systems, processes and software as a Hedge Fund COO where my job was building then identifying flaws and risks in those systems as well as in a due diligence capacity. Those skills were clearly used when circumventing multiple processes and systems in order to commit my crimes."

On his decision to plead guilty and cooperate, Varacchi has stated: "I realized after my 'journey' that no 'official authority' ever cared to learn how we accomplished what we did and how we kept it going for so long. So many were interested in learning how to prevent this from happening and to know what to look for for their own company."

Varacchi has spoken publicly about the emotional toll of white-collar prosecution, discussing "the guilt and fear he experienced during the investigation and the long wait for his sentencing," describing the years of uncertainty before prison as "a form of punishment in itself."

Terminology

• Ponzi Scheme: A form of investment fraud in which returns to earlier investors are paid using capital from newer investors rather than from legitimate investment profits, requiring a constant flow of new money to sustain and inevitably collapsing when new investment slows.

• Securities Fraud: Deceptive practices in the stock or commodities markets that induce investors to make purchase or sale decisions based on false information, resulting in losses.

• Wire Fraud: A federal crime involving any scheme to defraud another person or party by means of electronic communication, including telephone, email, radio, or television.

• Presentence Investigation (PSI): A report prepared by a U.S. Probation Officer that provides the sentencing judge with information about the defendant's background, criminal history, and circumstances of the offense, used to determine an appropriate sentence.

• Cooperation: Assistance provided by a defendant to federal prosecutors, often in exchange for a reduced sentence, which may include providing information about co-conspirators, testifying at trial, or participating in undercover operations.

• First Step Act: Federal legislation enacted in December 2018 that reformed federal prison policies, including earned time credits for participating in rehabilitative programs and expanded compassionate release eligibility.

• Anti-Money Laundering (AML): Laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income.

• Know Your Customer (KYC): Requirements that financial institutions verify the identity of clients to prevent money laundering, fraud, and terrorist financing.

• Hedge Fund: A pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques to improve performance.

• ACFE: The Association of Certified Fraud Examiners, the world's largest anti-fraud organization providing training and certification for fraud prevention professionals.

See also

• Prison Consultants