The Securities and Exchange Commission (SEC) has charged five individuals and four entities allegedly involved in a significant fraud scheme involving pre-initial public offering (IPO) investments.

The accused include Raymond J. Pirrello, Jr., Marcello Follano, Robert Cassino, Anthony DiTucci, Joseph Rivera, and their respective companies. The defendants allegedly engaged in deceptive practices leading to over $525 million in unregistered offerings.

These offerings drew investments from more than 4,000 individuals globally, promising no upfront fees while charging undisclosed markups. This resulted in illicit profits exceeding $88 million for the defendants and their network.

SEC's Allegations of Investor Deception

Sheldon Pollock, the Associate Regional Director in the New York Regional Office, mentioned: “As alleged in our complaint, the defendants sold unregistered securities to investors based on false promises of no upfront fees when they siphoned off tens of millions from such undisclosed fees for themselves.”

The defendants allegedly orchestrated a widespread network of unregistered sales agents, misleading investors by falsely asserting the absence of upfront fees. Instead, investors faced substantial undisclosed markups as high as 150 percent, ultimately benefiting the defendants and their sales agents.

The accused individuals allegedly concealed Pirrello Jr.'s involvement, hiding his past sanctioned by the SEC related to insider trading. The SEC's complaint, filed in the US District Court for the Eastern District of New York, charged the defendants with multiple violations of antifraud, securities, and broker-dealer registration laws. The regulator is seeking a permanent injunction against the individuals and the entities, restitution of ill-gotten gains, and civil penalties.

SEC Targets Unregistered Operations

Recently, the SEC has been pursuing companies for allegedly failing to register with the agency. Last month, the regulator launched a lawsuit against Kraken, a San Francisco-based crypto exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, alleging the illegal operation of unregistered services encompassing securities exchange, broker, dealer, and clearing agency activities.

These charges include allegations of mixing customers’ funds and crypto assets with that of Kraken, echoing similar accusations made against Binance and Coinbase. The SEC accused Kraken of operating as an exchange, broker, dealer, and clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term agency without obtaining the requisite registrations.

In response, Kraken denied accusations of fraud or market manipulation, asserting that none of the alleged funds were missing or misused. However, notably, Kraken did not refute the allegation of commingling funds but clarified that the SEC did not claim any missing or misused customer funds.