On June 7, 2024, the Securities and Exchange Commission (SEC) took decisive action against three individuals—Mario Gogliormella, Steven Lacaj, and Karim Ibrahim—charging them with fraud for raising over $184 million through unregistered membership interests in limited liability companies (LLCs). These LLCs purportedly invested in shares of pre-IPO companies via StraightPath Venture Partners LLC and later, Legend Venture Partners LLC. Both entities are now under court-ordered receiverships following prior SEC actions in May 2022 and June 2023, respectively.

FRAUDULENT ACTIVITIES AND CHARGES

The SEC's complaint reveals that the defendants directed an unregistered sales force of more than 50 individuals operating in boiler rooms to pressure investors into making investments. These investors were unaware that the shares had been marked up between approximately 19% and 105% above the prices that StraightPath or Legend had originally paid. Consequently, the defendants and their sales team amassed over $45 million in fees from 2019 to 2022.

Sheldon L. Pollock, Associate Director of the SEC's New York Regional Office, likened the fraud to a Hollywood movie, citing the use of scripts referred to as the “Bible” and high-pressure sales tactics filled with outright falsehoods. After the initial shutdown by the SEC, the defendants rebranded and continued their fraudulent activities under a new name.

The SEC’s complaint seeks permanent injunctive relief, the return of allegedly ill-gotten gains, and civil penalties. Additionally, the U.S. Attorney’s Office for the Southern District of New York unsealed an indictment charging Gogliormella, Lacaj, and Ibrahim with securities fraud and other offenses related to their work with StraightPath and Legend.

ONGOING SEC INVESTIGATIONS AND ACTIONS

The SEC’s ongoing investigation is being conducted by a dedicated team led by Joshua D. Tannen, Lee A. Greenwood, and others from the Asset Management Unit and the New York Regional Office. The litigation will be overseen by Mr. Tannen, Ms. Rao, and Ms. Bettis.

This case highlights the SEC's ongoing commitment to addressing fraudulent activities in the pre-IPO investment space. Past actions include:

• December 2023: Charges against five individuals and four companies in a $528 million pre-IPO fraud.
• March 2023: Charges against three StraightPath sales agents for fraud and unregistered broker activity.
• December 2020: Charges against a boiler room operator for defrauding retail investors in pre-IPO share sales.

KEY INVESTOR TAKEAWAYS

1. Due Diligence: Always perform thorough due diligence before investing in pre-IPO opportunities. Verify the legitimacy of the offering and the entities involved.
2. Red Flags: Be cautious of high-pressure sales tactics and promises of guaranteed returns. Legitimate investments rarely require immediate decisions or pressure tactics.
3. Price Transparency: Ensure transparency regarding the pricing of shares and any markups applied. Understanding the true cost of investment is crucial.
4. Regulatory Status: Check the registration status of the offering and the individuals or entities promoting it. Unregistered investments pose higher risks.
5. SEC Resources: Utilize the SEC’s resources, such as investor alerts and the EDGAR database, to research companies and investment opportunities.
6. Report Suspicious Activities: If you suspect fraudulent activities, report them to the SEC. Your vigilance can protect other investors and help regulatory authorities take swift action.

Investors should remain vigilant and informed, particularly when navigating the complex and high-risk landscape of pre-IPO investments. For more information and resources, visit the SEC’s website.