In re LEADDOG CAPITAL

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 9277 / November 15, 2011 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 65750 / November 15, 2011 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 3314 / November 15, 2011 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 29861 / November 15, 2011 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-14623 
 
 
In the Matter of 
 
LEADDOG CAPITAL 
MARKETS,  LLC, F/K/A 
LEADDOG CAPITAL 
PARTNERS, INC., CHRIS 
MESSALAS, AND JOSEPH 
LAROCCO, ESQ., 
 
Respondents. 
 
 
 
 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT 
TO SECTION 8A OF THE SECURITIES 
ACT OF 1933, SECTIONS 15(b) AND 
21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, SECTIONS 
203(e), 203(f) AND 203(k) OF THE 
INVESTMENT ADVISERS ACT OF 
1940, SECTION 9(b) OF THE 
INVESTMENT COMPANY ACT OF 
1940, AND RULE 102(e) OF THE 
SECURITIES AND EXCHANGE 
COMMISSION’S RULES OF 
PRACTICE 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities 
Act”), Sections   15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”), 
Sections 203(e),  (f) and (k) of the Investment Advisers Act of 1940 (“Advisers Act”) and 
Section 9(b) of the Investment Company Act of 1940 (“Investment Company Act”) against 
LeadDog Capital Markets, LLC, f/k/a LeadDog Capital Partners Inc. (“LeadDog”), Chris 
Messalas (“Messalas”) and Joseph LaRocco, Esq. (“LaRocco”) (collectively, 
“Respondents”).  

 2 
 
II. 
 
After an investigation, the Division of Enforcement alleges that: 
 
SUMMARY 
 
 1. From approximately November 2007 through approximately August 2009 
(the “Relevant Period”), Respondents raised at least $2.2 million from twelve investors 
for investment in LeadDog Capital LP (the “Fund”), a purported hedge fund.  
Respondents Messalas and LaRocco jointly owned and controlled the Fund’s adviser.  
During the Relevant Period, at Messalas’ direction the Fund was almost entirely invested 
in illiquid penny-stocks or other micro-cap private companies, each of which had 
received “going concern” opinions from their auditors, all but one of which had a 
consistent history of net losses, and most of which Respondents or their affiliates owned 
or controlled.   
 
 2. Respondents, however, deliberately, or at a minimum recklessly, painted a 
materially different picture of the Fund to existing and/or prospective investors.  To 
induce one elderly investor (“Investor A”) to invest $500,000 in the Fund, for example, 
Respondents represented falsely orally and in written materials in or about February 2009 
that at least half of the Fund’s assets were liquid and could be marked to market each day, 
that other assets would be valued in conformity with GAAP, and, further, that Investor A 
could exit the Fund at any time.  Respondents succeeded in obtaining $500,000 from 
Investor A between February and August 2009 (making him the Fund’s largest single 
investor).  In August 2009, when Investor A learned for the first time that the Fund was 
in fact heavily concentrated in illiquid securities, he demanded the return of his 
investment.  Respondents refused, and disclosed to Investor A for the first time that the 
Fund’s investments were illiquid.  To date, Respondents have refused to liquidate 
anything other than a small portion of 
Investor A’s investment in the Fund.                                                                                                                                                                                                                                                                                       
  
3. Respondents also made deliberate, or at a minimum, reckless, 
misrepresentations and material omissions of fact regarding LeadDog and the Fund on 
internet websites.  Respondents used these websites to, among other things, tout their 
experience in the securities industry, but through misrepresentations and material omissions 
to the operators of those websites (who acted as conduits in publishing Respondents’ 
information), deliberately concealed from the investing public that from 2004 through 2009 
Messalas directly or indirectly was involved in at least one NASD customer arbitration 
asserting securities law violations against him, and at least one broker-dealer he controlled, 
Carlton Capital Markets, Inc. (“Carlton Capital”), had been repeatedly fined, censured and, 
ultimately, expelled by FINRA.  Respondents also deliberately concealed these material 
facts from Investor A, in response to his direct written questions on the subject.  
 
 4. Respondents, finally, misrepresented to and concealed from existing and 
prospective investors the substantial conflicts of interests and related party transactions 
that characterized Respondents’ relationship to the Fund’s illiquid investments.  

 3 
Respondents deliberately, or at a minimum recklessly, misrepresented in a May 13, 2009 
letter to the Fund’s auditor that the only related party transaction involving the Fund was 
a 2% management fee paid to Messalas and LaRocco.  Respondents thus concealed from 
the auditor, and thus investors, that:  (i) Messalas and LaRocco collected various 
undisclosed fees and other payments made in connection with LeadDog investment 
activities for the Fund; (ii) Messalas directed the Fund’s investment in several companies 
in which he had a substantial ownership interest; and (iii) a substantial number of the 
companies the Fund had invested in were controlled by individuals connected to 
Respondents.  As a result of Respondents’ deliberate and material misrepresentations and 
omissions, the Fund’s audit report disclosed none of the foregoing conflicts and related 
party transactions, and Messalas and LaRocco then distributed this false and misleading 
financial statement to existing and prospective investors in the Fund.   
  
RESPONDENTS 
 
 5. LeadDog collectively refers to LeadDog Capital Partners, Inc. (“LD 
Partners”), LeadDog Capital Markets, LLC, (“LD Markets”) and LeadDog Capital 
Equities, LLC (“LD Equities”), each of which Messalas and LaRocco owned and 
controlled, and which at different times served as general partners, investment advisers 
and/or administrators to the Fund.  LD Partners, a Delaware company formed in 2007, was 
the general partner, investment adviser and administrator of the Fund through December 
31, 2008, after which LD Markets (a New York company formed in 2008) became the 
general partner and investment adviser, with LD Equities (also a New York company 
formed in 2008) becoming the administrator.  At all times during the  Relevant Period  
LeadDog was an investment adviser within the meaning of the Adviser  s Act.   
 
 6. Messalas, age 45, resides in Staten Island, New York.  Messalas owned 
100% of LeadDog through September 2008, and 60% thereafter when LaRocco purchased 
a 40% interest, and he was primarily responsible both for LeadDog’s investment decisions 
on behalf of the Fund and for determining the fair value of the Fund’s holdings.  From 
1996 to 2009, Messalas was a registered representative of nine successive broker-dealers.  
During the Relevant Period alone, he was a registered representative of three successive 
broker-dealers, and held Series 7, 24 and 63 securities licenses.    Messalas has a history of 
customer and FINRA complaints.  In November 2004, Messalas entered into a $45,000 
settlement with a customer whose NASD arbitration complaint alleged that Messalas 
caused $1.6 million in losses as a result of misrepresentations, omissions, churning and 
suitability violations.  In August 2005, FINRA censured and fined the broker-dealer that 
Messalas owned and controlled, Carlton Capital,  $10,000 for its failure to comply with the 
Bank Secrecy Act of 1970.  In November 2008, FINRA censured and fined Carlton Capital 
$40,000 for improperly providing registered representatives with access to unrecorded 
telephone lines and permitting representatives to accept customer orders on unrecorded 
lines.  In January 2009, FINRA expelled Carlton Capital for its failure to pay the $40,000.  
When that broker-dealer closed, Messalas opened a branch office of Brookstone Securities, 
Inc. (“Brookstone”) at the same location, which he controlled.  Messalas owned 100% of 
LD Partners through September 2008, and 60% thereafter.  Messalas is a 60% owner of LD 

 4 
Markets. At all times during the Relevant Period Messalas was an investment adviser 
within the meaning of the Advisers Act.   
 
 7. LaRocco, age 53, resides in New Canaan, Connecticut.  Since September 
2008, LaRocco has been a managing member, general counsel, and a 40% owner of 
LeadDog.  LaRocco is an attorney, licensed in Connecticut, whose legal practice included 
advising hedge funds on compliance with federal securities laws and regulations.  LaRocco 
was responsible for all legal functions on behalf of the Fund, and most administrative 
functions.  LaRocco has practiced before the Commission, representing clients in several 
Commission investigations.  LaRocco is not registered with the Commission in any 
capacity.  LaRocco purchased a 40% interest in LD Partners in September 2008 from 
Messalas, and also owns 40% of LD Markets.  
  
RELATED ENTITY 
 
8. The Fund is organized as a Delaware limited partnership that offered up to 
$25 million of its securities to accredited investors via unregistered offerings, claiming an 
exemption from registration under Section 4(2) and Rule 506 of Regulation D of the 
Securities Act.  The Fund purports to invest in private and publicly traded domestic and 
international securities, equities, debt instruments, convertible securities, options, and 
derivatives.  Through June 2009, the Fund raised approximately $2.2 million from twelve 
investors. 
 
FACTS 
 
9. Messalas and LaRocco jointly own, operate and control LeadDog, the 
investment adviser to the Fund.  Messalas was primarily responsible both for LeadDog’s 
investment decisions on behalf of the Fund and for determining the fair value of the Fund’s 
holdings.  LaRocco provided legal services, and was principally responsible for all 
marketing and administrative functions, including compiling the Fund’s private placement 
memoranda (“PPM”) and marketing materials.  LeadDog claimed total assets under 
management of $3.9 million as of September 2009, and approximately $4.25 million in 
assets under management as of July 2010.  Investors in the Fund contributed approximately 
$2.2 million in capital, and its General Partners – Messalas and LaRocco – contributed 
approximately $16,000.  Messalas and LaRocco personally solicited investors for the Fund 
orally and through written materials such as private placement memoranda, financial 
statements and written responses to investor questionnaires.  Respondents also advertised 
the Fund and its performance on Hedgefund.net and Hedgeco.net, two public websites that 
provide subscribers with information about potential investment opportunities.   
 
10. From November 2007 through August 2009, LeadDog and Messalas 
directed the Fund to acquire securities of the following public companies:  Therabiogen, 
Inc., Paradise Music and Entertainment, Inc., United EcoEnergy Corp., The Center for 
Wound Healing Inc., American Post Tension Inc., and Spring Creek Capital Corp., 
(respectively, Therabiogen, Paradise, EcoEnergy, Wound Healing, Post Tension and Spring 
Creek).  Each of these securities was illiquid and in 2008 and 2009, all but one of these 

 5 
public portfolio companies reported net losses that ranged between $70,000 and $4 million, 
and each received a “going concern” opinion from its respective auditor.  The Fund also 
held an investment in AudioStreet, Inc., an illiquid private company, and 3A NOW AG, an 
illiquid Swiss company that lists on the Frankfurt Stock Exchange.   
 
11. In addition, the Fund made loans to two parties that had connections with 
the Respondents:  (i) Philip Forman (“Forman”), an investor in the Fund, and officer or 
director of two companies in the Fund’s portfolio, and (ii) FSR. Inc., an entity controlled by 
Terry Hickel (“Hickel”), an associate of Messalas who was also an officer or director of 
multiple public or private companies in the Fund portfolio. 
 
12. Respondents created and distributed to prospective investors PPMs dated 
November 1, 2007, November 1, 2008, and January 1, 2009.  The PPMs are substantially 
identical, and each sought to raise $25 million in limited partnership interests for the Fund.  
LeadDog also provided investors and prospective investors with audited financial 
statements for the period November 2007 through December 2008.   
  
Respondents’ Misrepresentations and Omissions to the Fund’s Largest Investor 
 
13. From February through August 2009, LeadDog and its principals 
successfully induced Investor A to invest $500,000 in the Fund, by deliberately 
misrepresenting the Fund’s liquidity and the nature of its investment holdings, and the 
liquidity of Investor A’s investment in the Fund.  Respondents also deliberately concealed, 
in response to a question from Investor A, Messalas’ history of customer and FINRA 
complaints against him and a broker-dealer he controlled.   
 
14. After learning of the Fund as a potential investment opportunity from 
information Respondents published on Hedgeco.net, Investor A contacted Messalas on 
February 17, 2009, and requested that LeadDog submit written responses to a Due 
Diligence Questionnaire (“DDQ”) that contained a series of direct questions concerning, 
among other things, the Fund’s investments and LeadDog’s operations.  Six days later, 
LaRocco emailed Investor A (copying Messalas) and provided him with the Fund’s PPM.  
Two days after that, Messalas and LaRocco both signed LeadDog’s written responses  to 
Investor A’s DDQ and submitted it to him via fax.   
 
15. Investor A asked Respondents in his DDQ:  “What percent of the Fund 
assets are invested in non-liquid assets and cannot be marked to market each day?”  
Respondents responded falsely “50%.”  In response to another question from Investor A, 
Respondents also represented falsely, without qualification, that it would take 
approximately six months to liquidate the Fund’s entire portfolio.  Respondent’s statements 
regarding the composition and liquidity of the fund’s portfolio were false and misleading.  
In fact, all of the Fund’s non-cash investments – 92% of the Fund’s total assets – were 
illiquid, and none could be marked to market on a daily basis.  Respondents knew these 
statements were false and misleading when they made them, or at a minimum acted with 
reckless disregard for the truth.   
 

 6 
16. Respondents also falsely and deliberately, or at a minimum, recklessly, 
represented to Investor A orally in February 2009 that notwithstanding any lock-up 
provisions to the contrary, he could liquidate his entire investment in the Fund at any time.  
   
17. In addition, Investor A asked Respondents in his DDQ whether 
Respondents were the subject of any civil, criminal or regulatory complaints.  In response, 
Respondents deliberately and falsely concealed from Investor A Messalas’ history of 
NASD and FINRA complaints, including the censures, fines and expulsion levied against 
his firm, Carlton Capital, referred to above in paragraph 6, and described in greater detail 
below in paragraph 23.  On the contrary, Respondents deliberately provided a materially 
misleading biography of Messalas that omitted any discussion of Carlton Capital at all, but 
nonetheless touted that he had “over 15 years experience in the Securities industry,” noted 
he was the “Managing Director of Private Equities” at Brookstone, and that he “has his 
series 7, 24 and 63 Securities licenses with Brookstone Securities, Inc., a broker-dealer firm 
licensed with the Financial Industry Regulatory Authority.” 
 
18. Respondents also deliberately and falsely misrepresented to Investor A in 
their responses to his DDQ that “Gary T. Amato, CPA, P.C.” was the Fund’s 
“Administrator.”  In reality, Amato served only as a bookkeeper to the Fund, and LeadDog 
was the Administrator to the Fund through January 1, 2009, at which point Messalas and 
LaRocco transferred the administrative functions to another entity they jointly controlled, 
LD Equities. 
 
19. After receiving these oral and written material representations from 
Respondents, Investor A invested $500,000 in the Fund in stages from February through 
August 2009, an amount that constit uted approximately 15% of the total capital invested in 
the Fund, and made him its largest single investor.  
 
20. In August 2009, after he completed his investment in the Fund, Investor A 
reviewed the Fund’s audited financial statements (which Respondents had sent him in 
July), and learned for the first time that Respondents’ representation that 50% of the Fund’s 
assets were in liquid securities was false.  Investor A demanded the return of his 
investment, and except for $50,000 remitted to Investor A in December 2010, Respondents 
have refused to comply, admitting that the Fund was not sufficiently liquid to redeem his 
investment. 
 
Respondents’ Misrepresentations and Omissions  
Regarding Messalas’ History of Regulatory Complaints 
 
 21. LaRocco, with Messalas’ knowledge, deliberately supplied false and 
misleading information about Messalas’ regulatory history, as well as the Fund’s 
operations, to Hedgefund.net and Hedgeco.net, two websites that provide background, 
performance and other information about hedge fund investment opportunities to 
subscribers.  Hedgefund.net and Hedgeco.net published LeadDog’s misrepresentations as 
part of their profile of LeadDog on the respective websites.  LaRocco and Messalas were 

 7 
aware that Hedgefund.net and Hedgeco.net would act as conduits in publishing the false 
information they provided to investors and prospective investors.  
 
 22. Hedgefund.net required Respondents to submit written responses to a 
questionnaire that contained questions concerning, among other things, any legal or 
regulatory disputes involving LeadDog or its employees.  In their 2008 and 2009 responses 
to the Hedgefund.net questionnaire, Respondents represented falsely that there was no 
“litigation, complaints, arbitration, regulatory action and/or other disputes involving” 
LeadDog, or its employees, in the past 5 years.   
 
 23. As noted above, in reality, Messalas, acting either directly or through 
Carlton Capital, the broker-dealer he controlled, was involved in several NASD and 
FINRA complaints or actions during the preceding 5-year period.  Respondents thus 
deliberately concealed material information that: 
 
 a. In November 2004, Messalas entered into a $45,000 settlement with 
 a customer whose NASD arbitration complaint alleged that 
 Messalas caused $1.6 million in losses as a result of 
 misrepresentations, omissions, churning and suitability violations;   
 
 b. In August 2005, FINRA censured and fined Carlton Capital  
  $10,000 for its failure to comply with the Bank Secrecy Act of  
  1970;  
 
 c. In November 2008, FINRA censured and fined Carlton Capital  
  $40,000 for improperly providing registered representatives with  
  access to unrecorded telephone lines and permitting representatives 
  to accept customer orders on unrecorded lines; and  
 
 d. FINRA expelled Carlton Capital for its failure to pay the $40,000  
  fine in January 2009.   
 
24. Respondents also misrepresented to Hedgefund.net and Hedgeco.net that 
Amato was the Fund’s “Administrator.”  As described in paragraph 18, above, Amato 
served as a bookkeeper to the Fund.  The Fund’s Administrator was LeadDog and later LD 
Equities – both entities controlled jointly by Respondents Messalas and LaRocco.   
 
Respondents Concealed from the Fund’s Auditor and 
Investors Substantial Conflicts of Interests and Related Party Transactions 
 
       25. During the audit of the Fund’s financial statements for the period ended 
December 31, 2008, its auditor sought confirmation from Respondents that there were no 
related parties or transactions, first orally, then in writing via a management representation 
letter.  LaRocco, with Messalas’ knowledge, lied to the auditors at the outset of the audit, 
and claimed that he and LeadDog had disclosed all related parties and transactions.  
Respondents then repeated this false representation in the management representation letter 

 8 
dated May 13, 2009 that LaRocco signed, and provided to the auditor.  Specifically, 
LeadDog represented:  
 
The following have been properly recorded or disclosed in 
the financial statement: [ ]  Related-party transactions and 
other transactions with affiliates, including fees, 
commissions, sales, purchases, loans, transfers, leasing 
arrangements, guarantees, and amounts receivable from or 
payable to related parties. 
 
26. The Respondents deliberately concealed from the Fund’s auditor and the 
Fund’s investors a tangled web of related party transactions and conflicts of interests.  For 
example, the Respondents omitted to disclose that:  (i) Messalas and LaRocco collected 
various undisclosed fees and other payments  made in connection with LeadDog investment 
activities for the Fund; (ii) Messalas had invested the Fund in several companies in which 
he also had a substantial ownership interest; and (iii) Parties related to the Respondents 
controlled or participated extensively in Fund investments.  Specifically, Respondents 
concealed the following material information from the Fund’s auditor and investors: 
 
  Undisclosed Interests in the Fund’s Portfolio Companies 
 
  a. Messalas formed AudioStreet in 2008, and designated himself as 
the company’s president, secretary, treasurer, sole director, and chairman; Messalas 
was also AudioStreet’s controlling shareholder.  In February 2009, Messalas caused 
the Fund to purchase 1.5 million shares of AudioStreet. 
 
  b. Acting through an entity he solely controls, Roadrunner Capital 
Group, Inc. (“Roadrunner”), Messalas controlled 20% of EcoEnergy shares.  In 2007, 
Messalas directed the Fund to purchase 2.1 million shares of EcoEnergy.  With the 
2.1 million shares, in total Messalas controlled 26% of EcoEnergy shares. 
 
  Undisclosed Compensation 
 
  c. Carlton Capital, Messalas’ broker-dealer, obtained $20,000 in fees 
from the Fund for its role as placement agent for private offerings on behalf of 
EcoEnergy and Paradise. 
 
  d. Brookstone, the broker-dealer Messalas controlled, after FINRA 
expelled Carlton Capital, obtained approximately $30,000 in commissions from the 
Fund on the sale of EcoEnergy shares in private placements.  LaRocco was also paid 
legal fees of $2,000 in connection with the EcoEnergy offering. 
 
  e. LaRocco obtained $5,000 in legal fees in connection with the 
Fund’s purchase of convertible debentures issued by Paradise. 
 

 9 
  f. Messalas and LaRocco, as the managing members of LeadDog, 
also received $13,600 in undisclosed so-called “structuring and due diligence fees” 
related to the Fund’s investments.   
 
  Undisclosed Related Parties 
 
  g. Spring Creek’s registered investment adviser, Carlton Wealth 
Management LLC, was owned and operated by Messalas’ sister-in-law and a 
LeadDog employee, Nicole DePasquale (“DePasquale”).  Spring Creek paid 
Depasquale a monthly management fee of $1,500, plus a 3% performance fee, and 
she was employed by LeadDog as Messalas’ assistant. 
 
  h. Hickel, a Fund investor and the Chairman of the Advisory 
Committee for LeadDog, was also an officer or director of five of the six public 
companies in the Fund’s portfolio, as well as an officer or director of several other 
private companies in which Respondent LeadDog directed fund investments.  Hickel 
was also an employee of the broker-dealer controlled by Respondent Messalas, 
Brookstone.  In November 2008, the Fund lent $20,000 to an entity controlled by 
Hickel, and LeadDog recorded the loan as an asset of the Fund.  When Hickel failed 
to satisfy the loan and the note went into default, the Respondents took no action to 
collect the loan or otherwise protect the Fund’s interests.   
 
  i. Forman was an officer and/or director of two of the Fund portfolio 
companies, and a Fund investor.  In November 2008, the fund lent $50,000 to 
Forman.  The loan to Forman also went unpaid, and Respondents again took no action 
to collect the $50,000 the Fund is owed. 
 
27. As a result of Respondents’ deliberate false representations and omissions 
to the Fund’s auditor, on May 13, 2009 the auditor issued a clean audit report on the Fund’s 
financial statements.  However, based on information provided by the Respondents, the 
Fund’s audited financial statements represented falsely that the sole related party 
compensation relating to the Fund was the 2% management fee the Fund paid to Messalas 
and LaRocco. 
 
28. Messalas and LaRocco distributed the false and misleading financial 
statements to Investor A and other current investors shortly thereafter, and began routinely 
providing the financials to prospective investors as part of the Fund’s package of marketing 
materials.   
 
29. Upon learning of Respondents’ omissions in October 2009, the auditor 
resigned.  Several weeks later it   issued an audit retraction letter to LeadDog, citing its 
failure to disclose related party associations to the auditors during the course of the 2008 
audit.   
 
 
  

 10 
VIOLATIONS 
 
30. As a result of the conduct described above, Respondents willfully violated 
Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 
thereunder, which prohibit fraudulent conduct in the offer and sale of securities and in 
connection with the purchase or sale of securities. 
 
31. As a result of the conduct described above, Messalas and LaRocco willfully 
aided and abetted and caused LeadDog’s violations of Section 17(a) of the Securities Act, 
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent 
conduct in the offer and sale of securities and in connection with the purchase or sale of 
securities. 
 
 32. As a result of the conduct described above, LeadDog and Messalas willfully 
violated S ection 206(4) of the Advisers Act which makes it “unlawful for any investment 
adviser . . . to engage in any act, practice, or course of business which is fraudulent, 
deceptive, or manipulative,” and Rule 206(4)-8 thereunder, which makes it unlawful for an 
investment adviser to a pooled investment vehicle to engage in “fraudulent, deceptive, or 
manipulative” conduct with respect to any investor or prospective investor in a pooled 
investment vehicle.   
 
 33. As a result of the conduct described above, Messalas willfully aided and 
abetted and caused LeadDog’s violations of S ection 206(4) of the Advisers Act which 
makes it “unlawful for any investment adviser . . . to engage in any act, practice, or course 
of business which is fraudulent, deceptive, or manipulative,” and Rule 206(4)-8 thereunder, 
which makes it unlawful for an investment adviser to a pooled investment vehicle to 
engage in “fraudulent, deceptive, or manipulative” conduct with respect to any investor or 
prospective investor in a pooled investment vehicle.   
 
 34. As a result of the conduct described above, LaRocco willfully aided and 
abetted and caused LeadDog’s and Messalas’ violations of S ection 206(4) of the Advisers 
Act which makes it “unlawful for any investment adviser . . . to engage in any act, practice, 
or course of business which is fraudulent, deceptive, or manipulative,” and Rule 206(4)-8 
thereunder, which makes it unlawful for an investment adviser to a pooled investment 
vehicle to engage in “fraudulent, deceptive, or manipulative” conduct with respect to any 
investor or prospective investor in a pooled investment vehicle.   
 
III. 
 
In  view  of  the  allegations  made  by  the  Division  of  Enforcement,  the  Commission 
deems  it  necessary  and  appropriate  in  the  public  interest  that  public  administrative  and  
cease-and-desist proceedings be instituted to determine: 
 
A.  Whether the allegations set forth in Section II hereof are true and, in 
connection therewith, to afford Respondents  an opportunity to establish any defenses to such 
allegations;  

 11 
B. What, if any, remedial action is appropriate in the public interest against 
Respondent LeadDog pursuant to Section 203(e) of the Advisers Act including, but not 
limited to, disgorgement and civil penalties pursuant to Section 203 of the Advisers Act; 
 
C.  What, if any, remedial action is appropriate in the public interest against 
Respondent Messalas pursuant to Section 15(b)(6) of the Exchange Act,  including, but not 
limited to, disgorgement and civil penalties pursuant to Section 21B of the Exchange Act;  
 
D. What, if any, remedial action is appropriate in the public interest against 
Respondents Messalas and LaRocco pursuant to Section 203(f) of the Advisers Act, 
including, but not limited to, disgorgement and civil penalties pursuant to Section 203 of the 
Advisers Act; 
 
E. What, if any, remedial action is appropriate in the public interest against 
Respondents pursuant to Section 9(b) of the Investment Company Act including, but not 
limited to, disgorgement and civil penalties pursuant to Section 9 of the Investment 
Company Act; and   
 
F. What, if any, remedial action is appropriate in the public interest against 
Respondent LaRocco pursuant to Rule 102(e)(1) of the Commission’s Rules of Practice, 
including, but not limited to, denying, temporarily or permanently, the privilege of 
appearing or practicing before   the Commission. 
 
G.  Whether, pursuant to Section 8A of the Securities Act, Section 21C of the 
Exchange Act, and Section 203(k) of the Advisers Act, Respondents  should be ordered to 
cease and desist from committing or causing violations of and any future violations of 
Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 
thereunder, and Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, whether 
Respondents  should be ordered to pay a civil penalty pursuant to Section 8A(g) of the 
Securities Act, Section 21B(a) of the Exchange Act, and Section 203(i) of the Advisers Act, 
and whether Respondents  should be ordered to pay disgorgement pursuant to Section 8A(e) 
of the Securities Act, Sections  21B(e) and 21C(e) of the Exchange Act, and Section 203 of 
the Advisers Act. 
 
IV. 
 
IT  IS  ORDERED  that  a  public  hearing  for  the  purpose  of  taking  evidence  on  the  
questions set forth in Section III hereof shall be convened not earlier than 30 days and not 
later than 60 days from service of this Order at a time and place to be fixed, and before an 
Administrative Law Judge to be designated by further order as provided by Rule 110 of the 
Commission’s Rules of Practice, 17 C.F.R. § 201.110.   
 
IT  IS  FURTHER  ORDERED  that  Respondents    shall  file  an  Answer  to  the 
allegations  contained  in  this  Order  within  twenty  (20)  days  after  service  of  this  Order,  as  
provided by Rule 220 of the Commission’s Rules of Practice, 17 C.F.R. § 201.220.  
 

 12 
If    a Respondent fails    to file the directed answer, or fails to appear at a hearing after 
being duly notified, that Respondent may be deemed in default and the proceedings may be 
determined against him/it upon consideration of this Order, the allegations of which may be 
deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission’s 
Rules of Practice, 17 C.F.R. §§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 
 
This  Order  shall  be  served  forthwith  upon  Respondents   personally  or  by  certified  
mail. 
 
IT  IS  FURTHER  ORDERED  that  the  Administrative  Law  Judge  shall  issue  an  
initial  decision  no  later  than  300 days  from  the  date  of  service  of  this  Order,  pursuant  to  
Rule 360(a)(2) of the Commission’s Rules of Practice. 
 
In the absence of an appropriate waiver, no officer or employee of the Commission 
engaged in the performance of investigative or prosecuting functions in this or any factually 
related  proceeding  will  be  permitted  to  participate  or  advise  in  the  decision  of  this  matter,  
except as witness or counsel in proceedings held pursuant to notice.  Since this proceeding is 
not “rule making” within the meaning of Section 551 of the Administrative Procedure Act, it 
is  not  deemed  subject  to  the  provisions  of  Section  553  delaying  the  effective  date  of  any  
final Commission action. 
 
 By the Commission. 
 
 
 
        Elizabeth M. Murphy 
        Secretary 
 
 
 

UNITED STATES OF AMERICA 
Before the 

SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 9277 / November 15, 2011 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 65750 / November 15, 2011 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 3314 / November 15, 2011 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 29861 / November 15, 2011 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-14623 
 
 
In the Matter of 
 

LEADDOG CAPITAL 
MARKETS, LLC, F/K/A 
LEADDOG CAPITAL 
PARTNERS, INC., CHRIS 
MESSALAS, AND JOSEPH 
LAROCCO, ESQ., 

 
Respondents. 
 
 
 
 

ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT 
TO SECTION 8A OF THE SECURITIES 
ACT OF 1933, SECTIONS 15(b) AND 
21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, SECTIONS 
203(e), 203(f) AND 203(k) OF THE 
INVESTMENT ADVISERS ACT OF 
1940, SECTION 9(b) OF THE 
INVESTMENT COMPANY ACT OF 
1940, AND RULE 102(e) OF THE 
SECURITIES AND EXCHANGE 
COMMISSION’S RULES OF 
PRACTICE 

  
I. 

 
 The Securities and Exchange Commission (“Commission”) deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities 
Act”), Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”), 
Sections 203(e), (f) and (k) of the Investment Advisers Act of 1940 (“Advisers Act”) and 
Section 9(b) of the Investment Company Act of 1940 (“Investment Company Act”) against 
LeadDog Capital Markets, LLC, f/k/a LeadDog Capital Partners Inc. (“LeadDog”), Chris 
Messalas (“Messalas”) and Joseph LaRocco, Esq. (“LaRocco”) (collectively, 
“Respondents”).  



 2 

 
II. 
 

After an investigation, the Division of Enforcement alleges that: 
 

SUMMARY 
 
 1. From approximately November 2007 through approximately August 2009 
(the “Relevant Period”), Respondents raised at least $2.2 million from twelve investors 
for investment in LeadDog Capital LP (the “Fund”), a purported hedge fund.  
Respondents Messalas and LaRocco jointly owned and controlled the Fund’s adviser.  
During the Relevant Period, at Messalas’ direction the Fund was almost entirely invested 
in illiquid penny-stocks or other micro-cap private companies, each of which had 
received “going concern” opinions from their auditors, all but one of which had a 
consistent history of net losses, and most of which Respondents or their affiliates owned 
or controlled.   
 
 2. Respondents, however, deliberately, or at a minimum recklessly, painted a 
materially different picture of the Fund to existing and/or prospective investors.  To 
induce one elderly investor (“Investor A”) to invest $500,000 in the Fund, for example, 
Respondents represented falsely orally and in written materials in or about February 2009 
that at least half of the Fund’s assets were liquid and could be marked to market each day, 
that other assets would be valued in conformity with GAAP, and, further, that Investor A 
could exit the Fund at any time.  Respondents succeeded in obtaining $500,000 from 
Investor A between February and August 2009 (making him the Fund’s largest single 
investor).  In August 2009, when Investor A learned for the first time that the Fund was 
in fact heavily concentrated in illiquid securities, he demanded the return of his 
investment.  Respondents refused, and disclosed to Investor A for the first time that the 
Fund’s investments were illiquid.  To date, Respondents have refused to liquidate 
anything other than a small portion of Investor A’s investment in the Fund.                                                                                                                                                                                                                                                                                       
  

3. Respondents also made deliberate, or at a minimum, reckless, 
misrepresentations and material omissions of fact regarding LeadDog and the Fund on 
internet websites.  Respondents used these websites to, among other things, tout their 
experience in the securities industry, but through misrepresentations and material omissions 
to the operators of those websites (who acted as conduits in publishing Respondents’ 
information), deliberately concealed from the investing public that from 2004 through 2009 
Messalas directly or indirectly was involved in at least one NASD customer arbitration 
asserting securities law violations against him, and at least one broker-dealer he controlled, 
Carlton Capital Markets, Inc. (“Carlton Capital”), had been repeatedly fined, censured and, 
ultimately, expelled by FINRA.  Respondents also deliberately concealed these material 
facts from Investor A, in response to his direct written questions on the subject.  

 
 4. Respondents, finally, misrepresented to and concealed from existing and 
prospective investors the substantial conflicts of interests and related party transactions 
that characterized Respondents’ relationship to the Fund’s illiquid investments.  



 3 

Respondents deliberately, or at a minimum recklessly, misrepresented in a May 13, 2009 
letter to the Fund’s auditor that the only related party transaction involving the Fund was 
a 2% management fee paid to Messalas and LaRocco.  Respondents thus concealed from 
the auditor, and thus investors, that:  (i) Messalas and LaRocco collected various 
undisclosed fees and other payments made in connection with LeadDog investment 
activities for the Fund; (ii) Messalas directed the Fund’s investment in several companies 
in which he had a substantial ownership interest; and (iii) a substantial number of the 
companies the Fund had invested in were controlled by individuals connected to 
Respondents.  As a result of Respondents’ deliberate and material misrepresentations and 
omissions, the Fund’s audit report disclosed none of the foregoing conflicts and related 
party transactions, and Messalas and LaRocco then distributed this false and misleading 
financial statement to existing and prospective investors in the Fund.   
  
RESPONDENTS 

 
 5. LeadDog collectively refers to LeadDog Capital Partners, Inc. (“LD 
Partners”), LeadDog Capital Markets, LLC, (“LD Markets”) and LeadDog Capital 
Equities, LLC (“LD Equities”), each of which Messalas and LaRocco owned and 
controlled, and which at different times served as general partners, investment advisers 
and/or administrators to the Fund.  LD Partners, a Delaware company formed in 2007, was 
the general partner, investment adviser and administrator of the Fund through December 
31, 2008, after which LD Markets (a New York company formed in 2008) became the 
general partner and investment adviser, with LD Equities (also a New York company 
formed in 2008) becoming the administrator.  At all times during the  Relevant Period  
LeadDog was an investment adviser within the meaning of the Advisers Act.   
 
 6. Messalas, age 45, resides in Staten Island, New York.  Messalas owned 
100% of LeadDog through September 2008, and 60% thereafter when LaRocco purchased 
a 40% interest, and he was primarily responsible both for LeadDog’s investment decisions 
on behalf of the Fund and for determining the fair value of the Fund’s holdings.  From 
1996 to 2009, Messalas was a registered representative of nine successive broker-dealers.  
During the Relevant Period alone, he was a registered representative of three successive 
broker-dealers, and held Series 7, 24 and 63 securities licenses.  Messalas has a history of 
customer and FINRA complaints.  In November 2004, Messalas entered into a $45,000 
settlement with a customer whose NASD arbitration complaint alleged that Messalas 
caused $1.6 million in losses as a result of misrepresentations, omissions, churning and 
suitability violations.  In August 2005, FINRA censured and fined the broker-dealer that 
Messalas owned and controlled, Carlton Capital, $10,000 for its failure to comply with the 
Bank Secrecy Act of 1970.  In November 2008, FINRA censured and fined Carlton Capital 
$40,000 for improperly providing registered representatives with access to unrecorded 
telephone lines and permitting representatives to accept customer orders on unrecorded 
lines.  In January 2009, FINRA expelled Carlton Capital for its failure to pay the $40,000.  
When that broker-dealer closed, Messalas opened a branch office of Brookstone Securities, 
Inc. (“Brookstone”) at the same location, which he controlled.  Messalas owned 100% of 
LD Partners through September 2008, and 60% thereafter.  Messalas is a 60% owner of LD 



 4 

Markets. At all times during the Relevant Period Messalas was an investment adviser 
within the meaning of the Advisers Act.   
 
 7. LaRocco, age 53, resides in New Canaan, Connecticut.  Since September 
2008, LaRocco has been a managing member, general counsel, and a 40% owner of 
LeadDog.  LaRocco is an attorney, licensed in Connecticut, whose legal practice included 
advising hedge funds on compliance with federal securities laws and regulations.  LaRocco 
was responsible for all legal functions on behalf of the Fund, and most administrative 
functions.  LaRocco has practiced before the Commission, representing clients in several 
Commission investigations.  LaRocco is not registered with the Commission in any 
capacity.  LaRocco purchased a 40% interest in LD Partners in September 2008 from 
Messalas, and also owns 40% of LD Markets.  
  
RELATED ENTITY 
 

8. The Fund is organized as a Delaware limited partnership that offered up to 
$25 million of its securities to accredited investors via unregistered offerings, claiming an 
exemption from registration under Section 4(2) and Rule 506 of Regulation D of the 
Securities Act.  The Fund purports to invest in private and publicly traded domestic and 
international securities, equities, debt instruments, convertible securities, options, and 
derivatives.  Through June 2009, the Fund raised approximately $2.2 million from twelve 
investors. 
 
FACTS 

 
9. Messalas and LaRocco jointly own, operate and control LeadDog, the 

investment adviser to the Fund.  Messalas was primarily responsible both for LeadDog’s 
investment decisions on behalf of the Fund and for determining the fair value of the Fund’s 
holdings.  LaRocco provided legal services, and was principally responsible for all 
marketing and administrative functions, including compiling the Fund’s private placement 
memoranda (“PPM”) and marketing materials.  LeadDog claimed total assets under 
management of $3.9 million as of September 2009, and approximately $4.25 million in 
assets under management as of July 2010.  Investors in the Fund contributed approximately 
$2.2 million in capital, and its General Partners – Messalas and LaRocco – contributed 
approximately $16,000.  Messalas and LaRocco personally solicited investors for the Fund 
orally and through written materials such as private placement memoranda, financial 
statements and written responses to investor questionnaires.  Respondents also advertised 
the Fund and its performance on Hedgefund.net and Hedgeco.net, two public websites that 
provide subscribers with information about potential investment opportunities.   

 
10. From November 2007 through August 2009, LeadDog and Messalas 

directed the Fund to acquire securities of the following public companies:  Therabiogen, 
Inc., Paradise Music and Entertainment, Inc., United EcoEnergy Corp., The Center for 
Wound Healing Inc., American Post Tension Inc., and Spring Creek Capital Corp., 
(respectively, Therabiogen, Paradise, EcoEnergy, Wound Healing, Post Tension and Spring 
Creek).  Each of these securities was illiquid and in 2008 and 2009, all but one of these 



 5 

public portfolio companies reported net losses that ranged between $70,000 and $4 million, 
and each received a “going concern” opinion from its respective auditor.  The Fund also 
held an investment in AudioStreet, Inc., an illiquid private company, and 3A NOW AG, an 
illiquid Swiss company that lists on the Frankfurt Stock Exchange.   

 
11. In addition, the Fund made loans to two parties that had connections with 

the Respondents:  (i) Philip Forman (“Forman”), an investor in the Fund, and officer or 
director of two companies in the Fund’s portfolio, and (ii) FSR. Inc., an entity controlled by 
Terry Hickel (“Hickel”), an associate of Messalas who was also an officer or director of 
multiple public or private companies in the Fund portfolio. 

 
12. Respondents created and distributed to prospective investors PPMs dated 

November 1, 2007, November 1, 2008, and January 1, 2009.  The PPMs are substantially 
identical, and each sought to raise $25 million in limited partnership interests for the Fund.  
LeadDog also provided investors and prospective investors with audited financial 
statements for the period November 2007 through December 2008.   
  

Respondents’ Misrepresentations and Omissions to the Fund’s Largest Investor 
 
13. From February through August 2009, LeadDog and its principals 

successfully induced Investor A to invest $500,000 in the Fund, by deliberately 
misrepresenting the Fund’s liquidity and the nature of its investment holdings, and the 
liquidity of Investor A’s investment in the Fund.  Respondents also deliberately concealed, 
in response to a question from Investor A, Messalas’ history of customer and FINRA 
complaints against him and a broker-dealer he controlled.   

 
14. After learning of the Fund as a potential investment opportunity from 

information Respondents published on Hedgeco.net, Investor A contacted Messalas on 
February 17, 2009, and requested that LeadDog submit written responses to a Due 
Diligence Questionnaire (“DDQ”) that contained a series of direct questions concerning, 
among other things, the Fund’s investments and LeadDog’s operations.  Six days later, 
LaRocco emailed Investor A (copying Messalas) and provided him with the Fund’s PPM.  
Two days after that, Messalas and LaRocco both signed LeadDog’s written responses to 
Investor A’s DDQ and submitted it to him via fax.   

 
15. Investor A asked Respondents in his DDQ:  “What percent of the Fund 

assets are invested in non-liquid assets and cannot be marked to market each day?”  
Respondents responded falsely “50%.”  In response to another question from Investor A, 
Respondents also represented falsely, without qualification, that it would take 
approximately six months to liquidate the Fund’s entire portfolio.  Respondent’s statements 
regarding the composition and liquidity of the fund’s portfolio were false and misleading.  
In fact, all of the Fund’s non-cash investments – 92% of the Fund’s total assets – were 
illiquid, and none could be marked to market on a daily basis.  Respondents knew these 
statements were false and misleading when they made them, or at a minimum acted with 
reckless disregard for the truth.   

 



 6 

16. Respondents also falsely and deliberately, or at a minimum, recklessly, 
represented to Investor A orally in February 2009 that notwithstanding any lock-up 
provisions to the contrary, he could liquidate his entire investment in the Fund at any time.  

   
17. In addition, Investor A asked Respondents in his DDQ whether 

Respondents were the subject of any civil, criminal or regulatory complaints.  In response, 
Respondents deliberately and falsely concealed from Investor A Messalas’ history of 
NASD and FINRA complaints, including the censures, fines and expulsion levied against 
his firm, Carlton Capital, referred to above in paragraph 6, and described in greater detail 
below in paragraph 23.  On the contrary, Respondents deliberately provided a materially 
misleading biography of Messalas that omitted any discussion of Carlton Capital at all, but 
nonetheless touted that he had “over 15 years experience in the Securities industry,” noted 
he was the “Managing Director of Private Equities” at Brookstone, and that he “has his 
series 7, 24 and 63 Securities licenses with Brookstone Securities, Inc., a broker-dealer firm 
licensed with the Financial Industry Regulatory Authority.” 

 
18. Respondents also deliberately and falsely misrepresented to Investor A in 

their responses to his DDQ that “Gary T. Amato, CPA, P.C.” was the Fund’s 
“Administrator.”  In reality, Amato served only as a bookkeeper to the Fund, and LeadDog 
was the Administrator to the Fund through January 1, 2009, at which point Messalas and 
LaRocco transferred the administrative functions to another entity they jointly controlled, 
LD Equities. 

 
19. After receiving these oral and written material representations from 

Respondents, Investor A invested $500,000 in the Fund in stages from February through 
August 2009, an amount that constituted approximately 15% of the total capital invested in 
the Fund, and made him its largest single investor.  

 
20. In August 2009, after he completed his investment in the Fund, Investor A 

reviewed the Fund’s audited financial statements (which Respondents had sent him in 
July), and learned for the first time that Respondents’ representation that 50% of the Fund’s 
assets were in liquid securities was false.  Investor A demanded the return of his 
investment, and except for $50,000 remitted to Investor A in December 2010, Respondents 
have refused to comply, admitting that the Fund was not sufficiently liquid to redeem his 
investment. 

 
Respondents’ Misrepresentations and Omissions  

Regarding Messalas’ History of Regulatory Complaints 
 

 21. LaRocco, with Messalas’ knowledge, deliberately supplied false and 
misleading information about Messalas’ regulatory history, as well as the Fund’s 
operations, to Hedgefund.net and Hedgeco.net, two websites that provide background, 
performance and other information about hedge fund investment opportunities to 
subscribers.  Hedgefund.net and Hedgeco.net published LeadDog’s misrepresentations as 
part of their profile of LeadDog on the respective websites.  LaRocco and Messalas were 



 7 

aware that Hedgefund.net and Hedgeco.net would act as conduits in publishing the false 
information they provided to investors and prospective investors.  
 
 22. Hedgefund.net required Respondents to submit written responses to a 
questionnaire that contained questions concerning, among other things, any legal or 
regulatory disputes involving LeadDog or its employees.  In their 2008 and 2009 responses 
to the Hedgefund.net questionnaire, Respondents represented falsely that there was no 
“litigation, complaints, arbitration, regulatory action and/or other disputes involving” 
LeadDog, or its employees, in the past 5 years.   
 
 23. As noted above, in reality, Messalas, acting either directly or through 
Carlton Capital, the broker-dealer he controlled, was involved in several NASD and 
FINRA complaints or actions during the preceding 5-year period.  Respondents thus 
deliberately concealed material information that: 
 
 a. In November 2004, Messalas entered into a $45,000 settlement with 

 a customer whose NASD arbitration complaint alleged that 
 Messalas caused $1.6 million in losses as a result of 
 misrepresentations, omissions, churning and suitability violations;   

 
 b. In August 2005, FINRA censured and fined Carlton Capital  
  $10,000 for its failure to comply with the Bank Secrecy Act of  
  1970;  
 
 c. In November 2008, FINRA censured and fined Carlton Capital  
  $40,000 for improperly providing registered representatives with  
  access to unrecorded telephone lines and permitting representatives 
  to accept customer orders on unrecorded lines; and  
 
 d. FINRA expelled Carlton Capital for its failure to pay the $40,000  
  fine in January 2009.   

 
24. Respondents also misrepresented to Hedgefund.net and Hedgeco.net that 

Amato was the Fund’s “Administrator.”  As described in paragraph 18, above, Amato 
served as a bookkeeper to the Fund.  The Fund’s Administrator was LeadDog and later LD 
Equities – both entities controlled jointly by Respondents Messalas and LaRocco.   

 
Respondents Concealed from the Fund’s Auditor and 

Investors Substantial Conflicts of Interests and Related Party Transactions 
 
   25. During the audit of the Fund’s financial statements for the period ended 
December 31, 2008, its auditor sought confirmation from Respondents that there were no 
related parties or transactions, first orally, then in writing via a management representation 
letter.  LaRocco, with Messalas’ knowledge, lied to the auditors at the outset of the audit, 
and claimed that he and LeadDog had disclosed all related parties and transactions.  
Respondents then repeated this false representation in the management representation letter 



 8 

dated May 13, 2009 that LaRocco signed, and provided to the auditor.  Specifically, 
LeadDog represented:  
 

The following have been properly recorded or disclosed in 
the financial statement: [ ]  Related-party transactions and 
other transactions with affiliates, including fees, 
commissions, sales, purchases, loans, transfers, leasing 
arrangements, guarantees, and amounts receivable from or 
payable to related parties. 

 
26. The Respondents deliberately concealed from the Fund’s auditor and the 

Fund’s investors a tangled web of related party transactions and conflicts of interests.  For 
example, the Respondents omitted to disclose that: (i) Messalas and LaRocco collected 
various undisclosed fees and other payments made in connection with LeadDog investment 
activities for the Fund; (ii) Messalas had invested the Fund in several companies in which 
he also had a substantial ownership interest; and (iii) Parties related to the Respondents 
controlled or participated extensively in Fund investments.  Specifically, Respondents 
concealed the following material information from the Fund’s auditor and investors: 

 
  Undisclosed Interests in the Fund’s Portfolio Companies 
 

  a. Messalas formed AudioStreet in 2008, and designated himself as 
the company’s president, secretary, treasurer, sole director, and chairman; Messalas 
was also AudioStreet’s controlling shareholder.  In February 2009, Messalas caused 
the Fund to purchase 1.5 million shares of AudioStreet. 

 
  b. Acting through an entity he solely controls, Roadrunner Capital 
Group, Inc. (“Roadrunner”), Messalas controlled 20% of EcoEnergy shares.  In 2007, 
Messalas directed the Fund to purchase 2.1 million shares of EcoEnergy.  With the 
2.1 million shares, in total Messalas controlled 26% of EcoEnergy shares. 

 
  Undisclosed Compensation 
 

  c. Carlton Capital, Messalas’ broker-dealer, obtained $20,000 in fees 
from the Fund for its role as placement agent for private offerings on behalf of 
EcoEnergy and Paradise. 

 
  d. Brookstone, the broker-dealer Messalas controlled, after FINRA 
expelled Carlton Capital, obtained approximately $30,000 in commissions from the 
Fund on the sale of EcoEnergy shares in private placements.  LaRocco was also paid 
legal fees of $2,000 in connection with the EcoEnergy offering. 

 
  e. LaRocco obtained $5,000 in legal fees in connection with the 
Fund’s purchase of convertible debentures issued by Paradise. 
 



 9 

  f. Messalas and LaRocco, as the managing members of LeadDog, 
also received $13,600 in undisclosed so-called “structuring and due diligence fees” 
related to the Fund’s investments.   
 

  Undisclosed Related Parties 
 

  g. Spring Creek’s registered investment adviser, Carlton Wealth 
Management LLC, was owned and operated by Messalas’ sister-in-law and a 
LeadDog employee, Nicole DePasquale (“DePasquale”).  Spring Creek paid 
Depasquale a monthly management fee of $1,500, plus a 3% performance fee, and 
she was employed by LeadDog as Messalas’ assistant. 

 
  h. Hickel, a Fund investor and the Chairman of the Advisory 
Committee for LeadDog, was also an officer or director of five of the six public 
companies in the Fund’s portfolio, as well as an officer or director of several other 
private companies in which Respondent LeadDog directed fund investments.  Hickel 
was also an employee of the broker-dealer controlled by Respondent Messalas, 
Brookstone.  In November 2008, the Fund lent $20,000 to an entity controlled by 
Hickel, and LeadDog recorded the loan as an asset of the Fund.  When Hickel failed 
to satisfy the loan and the note went into default, the Respondents took no action to 
collect the loan or otherwise protect the Fund’s interests.   

 
  i. Forman was an officer and/or director of two of the Fund portfolio 
companies, and a Fund investor.  In November 2008, the fund lent $50,000 to 
Forman.  The loan to Forman also went unpaid, and Respondents again took no action 
to collect the $50,000 the Fund is owed. 

 
27. As a result of Respondents’ deliberate false representations and omissions 

to the Fund’s auditor, on May 13, 2009 the auditor issued a clean audit report on the Fund’s 
financial statements.  However, based on information provided by the Respondents, the 
Fund’s audited financial statements represented falsely that the sole related party 
compensation relating to the Fund was the 2% management fee the Fund paid to Messalas 
and LaRocco. 

 
28. Messalas and LaRocco distributed the false and misleading financial 

statements to Investor A and other current investors shortly thereafter, and began routinely 
providing the financials to prospective investors as part of the Fund’s package of marketing 
materials.   

 
29. Upon learning of Respondents’ omissions in October 2009, the auditor 

resigned.  Several weeks later it issued an audit retraction letter to LeadDog, citing its 
failure to disclose related party associations to the auditors during the course of the 2008 
audit.   

 
 

  



 10 

VIOLATIONS 
 

30. As a result of the conduct described above, Respondents willfully violated 
Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 
thereunder, which prohibit fraudulent conduct in the offer and sale of securities and in 
connection with the purchase or sale of securities. 

 
31. As a result of the conduct described above, Messalas and LaRocco willfully 

aided and abetted and caused LeadDog’s violations of Section 17(a) of the Securities Act, 
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent 
conduct in the offer and sale of securities and in connection with the purchase or sale of 
securities. 

 
 32. As a result of the conduct described above, LeadDog and Messalas willfully 
violated Section 206(4) of the Advisers Act which makes it “unlawful for any investment 
adviser . . . to engage in any act, practice, or course of business which is fraudulent, 
deceptive, or manipulative,” and Rule 206(4)-8 thereunder, which makes it unlawful for an 
investment adviser to a pooled investment vehicle to engage in “fraudulent, deceptive, or 
manipulative” conduct with respect to any investor or prospective investor in a pooled 
investment vehicle.   

 
 33. As a result of the conduct described above, Messalas willfully aided and 
abetted and caused LeadDog’s violations of Section 206(4) of the Advisers Act which 
makes it “unlawful for any investment adviser . . . to engage in any act, practice, or course 
of business which is fraudulent, deceptive, or manipulative,” and Rule 206(4)-8 thereunder, 
which makes it unlawful for an investment adviser to a pooled investment vehicle to 
engage in “fraudulent, deceptive, or manipulative” conduct with respect to any investor or 
prospective investor in a pooled investment vehicle.   
 
 34. As a result of the conduct described above, LaRocco willfully aided and 
abetted and caused LeadDog’s and Messalas’ violations of Section 206(4) of the Advisers 
Act which makes it “unlawful for any investment adviser . . . to engage in any act, practice, 
or course of business which is fraudulent, deceptive, or manipulative,” and Rule 206(4)-8 
thereunder, which makes it unlawful for an investment adviser to a pooled investment 
vehicle to engage in “fraudulent, deceptive, or manipulative” conduct with respect to any 
investor or prospective investor in a pooled investment vehicle.   
 

III. 
 
In view of the allegations made by the Division of Enforcement, the Commission 

deems it necessary and appropriate in the public interest that public administrative and 
cease-and-desist proceedings be instituted to determine: 

 
A.  Whether the allegations set forth in Section II hereof are true and, in 

connection therewith, to afford Respondents an opportunity to establish any defenses to such 
allegations;  



 11 

B. What, if any, remedial action is appropriate in the public interest against 
Respondent LeadDog pursuant to Section 203(e) of the Advisers Act including, but not 
limited to, disgorgement and civil penalties pursuant to Section 203 of the Advisers Act; 

 
C.  What, if any, remedial action is appropriate in the public interest against 

Respondent Messalas pursuant to Section 15(b)(6) of the Exchange Act, including, but not 
limited to, disgorgement and civil penalties pursuant to Section 21B of the Exchange Act;  

 
D. What, if any, remedial action is appropriate in the public interest against 

Respondents Messalas and LaRocco pursuant to Section 203(f) of the Advisers Act, 
including, but not limited to, disgorgement and civil penalties pursuant to Section 203 of the 
Advisers Act; 

 
E. What, if any, remedial action is appropriate in the public interest against 

Respondents pursuant to Section 9(b) of the Investment Company Act including, but not 
limited to, disgorgement and civil penalties pursuant to Section 9 of the Investment 
Company Act; and   

 
F. What, if any, remedial action is appropriate in the public interest against 

Respondent LaRocco pursuant to Rule 102(e)(1) of the Commission’s Rules of Practice, 
including, but not limited to, denying, temporarily or permanently, the privilege of 
appearing or practicing before the Commission. 

 
G.  Whether, pursuant to Section 8A of the Securities Act, Section 21C of the 

Exchange Act, and Section 203(k) of the Advisers Act, Respondents should be ordered to 
cease and desist from committing or causing violations of and any future violations of 
Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 
thereunder, and Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, whether 
Respondents should be ordered to pay a civil penalty pursuant to Section 8A(g) of the 
Securities Act, Section 21B(a) of the Exchange Act, and Section 203(i) of the Advisers Act, 
and whether Respondents should be ordered to pay disgorgement pursuant to Section 8A(e) 
of the Securities Act, Sections 21B(e) and 21C(e) of the Exchange Act, and Section 203 of 
the Advisers Act. 

 
IV. 

 
IT IS ORDERED that a public hearing for the purpose of taking evidence on the 

questions set forth in Section III hereof shall be convened not earlier than 30 days and not 
later than 60 days from service of this Order at a time and place to be fixed, and before an 
Administrative Law Judge to be designated by further order as provided by Rule 110 of the 
Commission’s Rules of Practice, 17 C.F.R. § 201.110.   

 
IT IS FURTHER ORDERED that Respondents shall file an Answer to the 

allegations contained in this Order within twenty (20) days after service of this Order, as 
provided by Rule 220 of the Commission’s Rules of Practice, 17 C.F.R. § 201.220.  

 



 12 

If a Respondent fails to file the directed answer, or fails to appear at a hearing after 
being duly notified, that Respondent may be deemed in default and the proceedings may be 
determined against him/it upon consideration of this Order, the allegations of which may be 
deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission’s 
Rules of Practice, 17 C.F.R. §§ 201.155(a), 201.220(f), 201.221(f) and 201.310. 

 
This Order shall be served forthwith upon Respondents personally or by certified 

mail. 
 
IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an 

initial decision no later than 300 days from the date of service of this Order, pursuant to 
Rule 360(a)(2) of the Commission’s Rules of Practice. 

 
In the absence of an appropriate waiver, no officer or employee of the Commission 

engaged in the performance of investigative or prosecuting functions in this or any factually 
related proceeding will be permitted to participate or advise in the decision of this matter, 
except as witness or counsel in proceedings held pursuant to notice.  Since this proceeding is 
not “rule making” within the meaning of Section 551 of the Administrative Procedure Act, it 
is not deemed subject to the provisions of Section 553 delaying the effective date of any 
final Commission action. 

 
 By the Commission. 
 
 
 
        Elizabeth M. Murphy 
        Secretary 
 

 
 


	UNITED STATES OF AMERICA
	In the Matter of
	LEADDOG CAPITAL MARKETS, LLC, F/K/A LEADDOG CAPITAL PARTNERS, INC., CHRIS MESSALAS, AND JOSEPH LAROCCO, ESQ.,
	Respondents.
	RELATED ENTITY
	Respondents’ Misrepresentations and Omissions to the Fund’s Largest Investor
	VIOLATIONS