The Securities and Exchange Commission charged five unregistered brokers and four companies in a pre-IPO fraud scheme that resulted in over $525 million in unregistered offerings, which netted the offenders more than $88 million in illicit profits from undisclosed fees, the regulator said.
The SEC announced the charges last week against Raymond J. Pirrello, Jr., Marcello Follano, Robert Cassino, Anthony DiTucci, Joseph Rivera, and their New Jersey and New York-based companies Prior 2 IPO, Late Stage Asset Management, Pre IPO Marketing, and JL Rivera Enterprises—all for making allegedly fraudulent investment offerings in IPO companies.
The SEC complaint stated they employed a nationwide network of unregistered sales agents who raised at least $528 million in unregistered offerings of pre-IPO securities. The schemers reached out to over 4,000 investors worldwide, regulators said.
According to the complaint, the scammers falsely told investors there were no upfront fees on the offerings, with the offenders only earning a profit after the pre-IPO companies went public. However, they charged investors undisclosed upfront markups of up to 150%. As a result, the schemers netted over $88 million.
The SEC also accused all those charged of “going to great lengths” to hide the identity of one of the ringleaders, Pirrello, from investors and potential employees. In an earlier SEC administrative proceeding in Aug. 2019, Pirrello was barred from associating with broker-dealers when a jury found him liable for insider trading.
“We continue to scrutinize closely the sale of unregistered, pre-IPO investments to retail investors,” said Sheldon L. Pollock, Associate Regional Director in the New York Regional Office. Read more.