U.S. authorities are continuing to tackle investment schemes involving pre\u2013initial public offering (pre-IPO) company investments that, they allege, are duping investors.<\/p>\n
The U.S. Securities and Exchange Commission (SEC) settled charges against three sales reps from a purported private equity investment firm, StraightPath Venture Partners, for engaging in unregistered broker activity by soliciting investors for unregistered funds that purported to invest in pre-IPO companies.<\/p>\n
The trio settled the SEC’s allegations, without admitting or denying the SEC’s findings, and agreed to pay over US$2.8 million in disgorgement and penalties, along with industry bans.<\/p>\n
According to the SEC’s orders, the reps allegedly advised investors, provided them with marketing materials and took transaction-based compensation despite not being registered as brokers.<\/p>\n
Combined, they took in about US$17 million from investors and received about US$2.1 million of that in compensation from the investment funds, the SEC alleged.<\/p>\n
The SEC has previously charged several others (in 2022 and 2023) in connection with purported pre-IPO investments offered by StraightPath, including one of the reps who settled charges today.<\/p>\n
\u201cToday\u2019s resolutions demonstrate our continued efforts to hold accountable unregistered brokers, including those who facilitate the sale of pre-IPO investments to retail investors,\u201d said Sheldon Pollock, associate director in the SEC’s New York office, in a release.<\/p>\n
\u201cThe division of enforcement continues to scrutinize the registration status of individuals selling pre-IPO shares to retail investors,\u201d he said.<\/p>\n
In a separate case, U.S. authorities filed criminal charges against the alleged operators of a couple of unregistered fund managers that pitched investment funds that focused on pre-IPO companies.<\/p>\n
In a federal court in Brooklyn, three executives at investment firms Max Infinity Management LLC and Elder Fund Management LLC were indicted, along with a couple of the firms’ senior salespeople, on charges of conspiracy, securities fraud, investment adviser fraud and money laundering conspiracy for their roles in a scheme that allegedly charged large undisclosed markups on pre-IPO fund investments, which raised approximately US$60 million from investors.<\/p>\n
According to the indictment, the funds’ investors were defrauded, authorities alleged, when investors were promised the funds charged no upfront fees, that the funds acquired pre-IPO shares directly from the companies, and that the firms were registered with the SEC.<\/p>\n
It’s alleged that the funds charged large markups and paid huge commissions to their salespeople, representing about US$27 million of the US$60 million that they raised from investors.<\/p>\n
\u201cAs alleged, based on false promises the defendants bilked investors out of millions of dollars,\u201d said Breon Peace, U.S. attorney for the Eastern District of New York, in a release.<\/p>\n
\u201cThey lied about how they made money and promised near-certain returns on investment when, in truth, they charged astonishing markups, at times greater than 95%, and defrauded investors,” he said.<\/p>\n
The allegations in that case have not been proven, and the accused are presumed innocent of the charges against them.<\/p>\n","protected":false},"excerpt":{"rendered":"
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