Hedge Fund Manager Gets Four Years for $20 Million Fraud Scheme

(Bloomberg) -- The co-founder of a Connecticut hedge fund was ordered to spend four years in prison for scamming more than two dozen investors out of nearly $20 million in a Ponzi-like scheme.

Jason Rhodes was sentenced on Wednesday by U.S. District Judge Sidney Stein in Manhattan. Rhodes pleaded guilty in January 2020 to charges that he used more than $19 million he raised for his fund, Sentinel Growth Fund Management LLC, to repay early investors and for personal expenses like a vacation in Dubai and a luxury timeshare. 

A tearful Rhodes apologized for his conduct before the sentence was handed down, saying he was “ashamed and disgusted” with himself over his “negligent, reckless and selfish” conduct.

“I selfishly thought about myself and I did not think about the consequences of my actions,” Rhodes said.

Federal prosecutors had asked the judge to impose a sentence below federal guidelines, which called for Rhodes to spend more than a decade in prison. Defense lawyers had sought a year of home confinement.

Sentinel Growth co-founder Mark Varacchi pleaded guilty in February 2017 to fraud charges and agreed to cooperate with the government. Another Connecticut man, Steven Simmons, pleaded guilty to related fraud charges and was sentenced to more than three years in prison.

The case is U.S. v. Rhodes, 18-cr-887, U.S. District Court, Southern District of New York (Manhattan).

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