The Securities and Exchange Commission (SEC) has charged John LoPinto, Robert Wilkos, and Laren Pisciotti, along with six entities they controlled, for orchestrating a $120 million pre-IPO fraud scheme. The charges, announced today, relate to a fraudulent investment operation involving interests in private funds purportedly holding shares in pre-IPO companies.
The entities involved include Pre IPO Marketplace Inc., Keyport Venture Partners LLC, Keyport Venture Management LLC, Keyport Venture Advisors LLC—jointly owned or controlled by LoPinto and Wilkos—and Principal Pre-IPO Consulting Group LLC, as well as GlobalX VC LLC, owned or controlled by Pisciotti.
$120 million raised from 900 investors by misleading investors
According to the SEC complaint, from October 2019 to December 2022, the defendants raised approximately $120 million from more than 900 investors across the U.S. and abroad. They allegedly misled investors by claiming the investments carried no upfront fees, falsely stating that the funds were registered with the SEC, and misrepresenting their ownership of pre-IPO shares. The defendants reportedly paid themselves at least $16 million in commissions while misleading investors about fee structures. Additionally, LoPinto used an alias to conceal his history of disciplinary actions by the SEC and FINRA. Many investors never received the promised pre-IPO shares despite their investments.
Stacy L. Bogert, Associate Director of the SEC’s Division of Enforcement, said, “As alleged, among other lies, the defendants lied about the shares they owned and about fees they said they wouldn’t charge, and in the end, they took millions of their investors’ money for themselves. Today we start the process of holding them accountable for their fraudulent conduct.”
The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges the defendants with violating antifraud provisions of federal securities laws. The SEC is seeking permanent injunctive relief, the return of alleged ill-gotten gains, prejudgment interest, and civil penalties. It also aims to impose industry and officer-and-director bans on LoPinto, Wilkos, and Pisciotti. Wilkos has agreed to settle the case, consenting to injunctive relief, with additional remedies to be determined by the court later.
SEC previously charged several Pre-IPO frauds
The pre-IPO market is becoming increasingly popular as IPO activity remains subdued, and many investors seek alternatives to traditional public offerings. However, this surge in pre-IPO interest also raises concerns about increased fraud risks. Investors in the pre-IPO market face challenges like limited information compared to public markets, potential illiquidity, and the absence of stringent regulatory oversight. These factors can create an environment more susceptible to fraud and misinformation, making due diligence crucial for pre-IPO investments.
The SEC’s actions against fraudulent activities in the pre-IPO market highlight ongoing risks faced by investors.
In December 2023, the SEC charged five individuals and four companies for raising over $528 million in unregistered offerings from more than 4,000 global investors. The defendants used unregistered sales agents and misled investors by promising no upfront fees while imposing undisclosed markups, ultimately pocketing more than $88 million in the process .
Earlier, in June 2023, the SEC obtained a preliminary injunction against Legend Venture Partners LLC for running a boiler room scheme that raised $35 million from over 300 investors. The firm misrepresented its fee structure, charging exorbitant undisclosed markups that averaged nearly 60%, leading to more than $12.8 million in upfront compensation for its sales agents .
In March 2023, the SEC charged Scott Hollender, Gabriel Migliano Jr., and Frank Vecchio for selling shares in pre-IPO companies through StraightPath Venture Partners LLC while unregistered as broker-dealers. The defendants misled investors about fees, falsely claiming no upfront charges while receiving approximately 10% in commissions. Collectively, they solicited at least $13 million from over 115 investors, earning around $3.7 million in transaction-based compensation. This case followed earlier charges against StraightPath Venture Partners in May 2022 for a $410 million fraud scheme .
These cases collectively illustrate the increasing scrutiny on the pre-IPO market amid rising investor interest and highlight the persistent fraud risks as investors seek access to high-potential private investments.
