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 , 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 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.
