Fifteen lawsuits allege at least $60 million was raised through a Ponzi scheme run by Norada Capital Management — with a Regulation D "bad actor" violation at its core.
Investors from 15 states filed coordinated federal lawsuits on March 24 in the Central District of California (Case No. 8:26-cv-00686 et al.), targeting Marco G. Santarelli, Ronald A. Fossum Jr., Michael Johnson, and Norada Fund Management, LLC. The cases accuse the group of selling unregistered promissory notes from at least June 2020 through July 2024, promising 12% to 17% annual returns backed by what was described as a diversified portfolio spanning real estate, e-commerce, and media businesses.
According to the filings, none of it was what it appeared to be.
The lawsuits allege that investor money was commingled across a web of Norada-branded entities, that returns to earlier investors came from newer investor capital, and that the enterprise was insolvent the entire time. Balance sheets distributed in May 2023 allegedly claimed the so-called "Mastermind Businesses" held $113.4 million in total assets — figures the filings say were false.
At the center of the regulatory story is a "bad actor" problem that should give every compliance professional pause. The lawsuits allege that Fossum, who served as CFO, had been permanently barred by the SEC in 2018 after being convicted of misappropriating investor funds through unregistered securities offerings. Under Rule 506(d) of the Securities Act, that bar should have disqualified Norada Capital from claiming a Regulation D private offering exemption. Instead, according to the filings, Santarelli signed and certified the company's Form D with the SEC on November 30, 2020 — allegedly verifying that no such disqualifications applied.
The filings also point to a trail of undisclosed red flags: Santarelli's former company, 360 Enterprises d/b/a Norada Real Estate, filed for bankruptcy in 2007; he personally filed for bankruptcy in 2008; the Pennsylvania Securities Commission issued a cease-and-desist order against him in June 2011; and the California Department of Corporations followed with its own on June 13, 2012. None of this, the lawsuits allege, was disclosed to investors.
The SEC has already acted. On October 20, 2025, it filed an enforcement action charging Santarelli with operating a Ponzi-like scheme. He consented to judgment, admitting violations of federal securities laws. In parallel criminal proceedings, he pled guilty to wire fraud.
The 15 civil suits — filed on behalf of investors from states including Arizona, California, New York, Texas, and Wisconsin — assert claims under Section 10(b) and Section 20(a) of the Securities Exchange Act. Jury trials have been requested in all matters.
For wealth managers and compliance teams, the case is a pointed reminder: "bad actor" disqualification rules under Regulation D are not fine print. They exist to keep convicted securities violators out of private offerings — and according to these lawsuits, they were ignored entirely.
No court has made a final determination in any of the cases.
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