The SEC has charged a group of people and their associated companies of running a scam that claimed investors could obtain pre-IPO shares of hot companies, including Facebook.
The used a series of companies, including Florida-based Praetorian Global Fund and Spartan Capital to take in money. The idea was simple, the SEC said. They said they had access to private shares of Facebook and other hot companies set aside in a series of other funds people could invest in. The companies are expected to issue IPOs in the near future and their private shares are considered valuable because they could be convertible and are hard to come by.
Generally, only founders, venture capitalists and early insiders get a shot at these shares. The SEC says the group of men, based in Florida, New Jersey and New York, never had access to the shared and were just pocketing it.
Three of those involved in the alleged conspiracy faced allegations of misconduct in the past.
John A. Mattera, 50 of Florida, was convicted eight years ago of running a smaller version of this scheme in which he sold securities he didn’t own. He pleaded guilty to seven counts of grand theft in a separate Florida criminal case, the SEC said.
In 2009, John Arnold, age 61, also of Florida was found liable for securities fraud and ordered to pay a $65,000 fine.
And David Howard II, 32 of New York City was charged earlier this year with fraud in connection with he operation of a boiler room trading scam.
Here’s a link to the SEC release on the scam: