SEC Charges Five Unregistered Brokers, Four Companies in Widespread Pre-IPO Fraud Scheme

The Securities and Exchange Commission today announced charges against 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. for making fraudulent offerings relating to investments in pre-initial public offering (IPO) companies.

According to the SEC’s complaint, the defendants employed a nationwide 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. The complaint alleges that the defendants falsely told investors that there were no upfront fees on the offerings and that the defendants would only make a profit after the pre-IPO companies went public; however, all investors were charged undisclosed upfront markups, some as high as 150 percent, from which the defendants and their network of unregistered sales agents pocketed more than $88 million.

“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,” said Sheldon L. Pollock, Associate Regional Director in the New York Regional Office. “We continue to scrutinize closely the sale of unregistered, pre-IPO investments to retail investors.”

The SEC alleges that the charged individuals went to great lengths to conceal the identity of one of the scheme’s ringleaders, Pirrello, from investors and potential employees to hide the fact that he was barred from associating with broker-dealers in an earlier administrative proceeding by the SEC, after a jury found him liable for insider trading in August 2019.

The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges the five individuals and four entities with violations of the antifraud, securities and broker-dealer registration, and other provisions of the federal securities laws. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with pre-judgment interest, and civil penalties against all of the defendants, as well as officer and director bars against Pirrello, Follano, Cassino, DiTucci, and Rivera.

The SEC’s ongoing investigation is being conducted by Karen M. Lee, Melissa A. Coppola, Zheng (Jane) He, and Gerald Gross of the New York Regional Office. The matter is being supervised by Mr. Pollock. The litigation will be led by Debra Jaroslawicz, Ms. Lee, and Ms. He. The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of New York and the FBI. 

Investors can learn more about the risks involved with investing in unregistered offerings by reading such SEC investor bulletins as 10 Red Flags That An Unregistered Offering May Be A Scam, Private Placements Under Regulation D, and Pre-IPO Investment Scams.