After the U.S. Securities and Exchange Commission (SEC) shut down an alleged fraud scheme involving boiler rooms selling “pre–initial public offering” shares, the operators started a new scheme doing the same thing, the regulator alleges.

In May 2022, the SEC took emergency action against StraightPath Venture Partners LLC, freezing its assets amid allegations it was a boiler room scheme pushing heavily marked-up shares in private companies. The regulator took similar action in June 2023 against another firm, Legend Venture Partners LLC. Both companies are now in court-ordered receivership.

On Friday the SEC brought charges against three men — Mario Gogliormella, Steven Lacaj and Karim Ibrahim — alleging they were involved with both schemes, which took in over US$184 million from investors.

U.S. authorities allege that StraightPath and Legend Venture Partners, along with a third company, L&G Capital Corp., operated a series of related unregistered investment funds that bought shares in various private companies and then re-sold them to retail investors with hefty markups and undisclosed commissions.

Authorities allege the trio defrauded investors of US$28 million in undisclosed markups on the shares and US$17.5 million in undisclosed fees and commissions.

“We allege that the fraud in this case is like a Hollywood movie where the defendants ran boiler rooms using scripts they referred to as the ‘Bible,’ engaged in high-pressure sales tactics, and employed outright falsehoods to defraud investors,” said Sheldon Pollock, associate director of the SEC’s New York office.

“After the SEC shut them down the first time, they simply rebranded their outfit, and today through our action we are seeking to ensure they are held accountable for enticing and lying to investors,” he said.

The SEC’s complaint charges the trio with securities law violations and seeks permanent injunctive relief, disgorgement of allegedly ill-gotten gains and civil penalties.

In a parallel action, the three men were charged criminally with securities fraud, wire fraud, investment adviser fraud and conspiracy.

None of the allegations have been proven, and the men are presumed innocent of the criminal charges.