The Securities and Exchange Commission (SEC) announced on Thursday it had filed charges against five individuals and four companies for making fraudulent offerings in pre-initial public offering (IPO) companies.
Officials with the SEC said Raymond J. Pirrello, Jr.; Marcello Follano; Robert Cassino; Anthony DiTucci; Joseph Rivera; and their New Jersey or New York-based companies Prior 2 IPO Inc.; Late Stage Asset Management, LLC; Pre IPO Marketing Inc.; and JL Rivera Enterprises Ltd., used a network of unregistered sales agents to raise at least $528 million in unregistered offerings of pre-IPO securities from more than 4,000 investors around the world.
In its complaint, the SEC said the defendants falsely told the investors that there were no upfront fees on the offerings and that the men and their companies would profit after the companies went public. However, the defendants charged the investor victims with undisclosed upfront markups, some as high as 150 percent, that the defendants and their sales agents pocketed. Those fees amounted to more than $88 million, officials said.
The SEC further alleges that the five men and their companies went to great lengths to conceal the identity of one of the scheme’s ringleaders, Pirrello, due to the fact that he was barred from associating with broker-dealers as a result of previous SEC administrative proceedings in 2019 where a jury found him liable for insider trading.
The men and their companies are charged with violations of the antifraud, securities and broker-dealer registration, and other provisions of the federal securities laws. Officials said the SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains with interest and civil penalties.