March 23, 2023 —The Securities and Exchange Commission has charged three individuals for selling interests in pre-IPO companies without registering as broker-dealers and misleading investors about associated fees. Scott Hollender, Gabriel Migliano, Jr., and Frank Vecchio were accused of actively soliciting investments for funds set up as series limited liability companies (LLCs) between November 2017 and November 2021.
The SEC‘s Allegations
The SEC complaint alleges that the defendants provided investors with marketing materials and advised them on the supposed benefits of the investments, receiving transaction-based compensation despite not being registered as brokers. The three individuals collectively solicited at least $13 million in investments from 115 investors, and each received upfront commissions of around 10 percent on successful investments. However, they falsely told investors that there were no upfront fees associated with their investments. The defendants received at least $3.7 million in transaction-based compensation, according to the complaint.
The SEC previously charged StraightPath Venture Partners, StraightPath Management LLC, and its four principals in May 2022 in connection with a $410 million fraud. The SEC’s complaint filed in the U.S. District Court for the Southern District of New York charges defendants with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties.
Unregistered Sales Agents Fraudulently Solicited Investors
Antonia M. Apps, Director of the New York Regional Office, said, “StraightPath Venture Partners could not have cheated investors without the unregistered sales agents who fraudulently solicited them. The SEC will continue to hold individuals accountable for their wrongdoing, including a failure to register.”
Entities controlled by Hollender and Vecchio, GSH Empire Inc. and 21st Century Gold & Silver Inc., respectively, were named as relief defendants for the purpose of recovering ill-gotten gains generated through their alleged conduct.
Investing in pre-IPO companies can be lucrative but also comes with significant risks, including the potential for fraud. Investors should always do their due diligence before investing and verify that the offering is registered with the SEC. If an offering is not registered, investors should be cautious and consider seeking advice from a licensed professional.
Have a securities law question? Call New York Securities Lawyers at 212-509-6544.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
