SEC Charges Five Unregistered Brokers, Four Companies in $528M Pre-IPO Fraud Scheme

The Securities and Exchange Commission (SEC) has taken legal action against Raymond J. Pirrello, Jr., Marcello Follano, Robert Cassino, Anthony DiTucci, Joseph Rivera, and their associated companies – Prior 2 IPO Inc., Late Stage Asset Management, LLC, Pre IPO Marketing Inc., and JL Rivera Enterprises Ltd. The charges stem from an alleged widespread fraudulent scheme involving investments in pre-initial public offering (IPO) companies.

The SEC's complaint asserts that the defendants orchestrated a nationwide network of unregistered sales agents, raising a staggering $528 million through unregistered offerings of pre-IPO securities from over 4,000 investors worldwide. The complaint contends that investors were misled with false assurances of no upfront fees on the offerings, while, in reality, they were subjected to undisclosed upfront markups, reaching as high as 150 percent. These undisclosed fees purportedly generated over $88 million, benefiting the defendants and their network of unregistered sales agents.

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

The SEC's complaint, filed in the U.S. District Court for the Eastern District of New York, outlines charges against the five individuals and four entities, citing violations of antifraud, securities, broker-dealer registration, and other provisions of federal securities laws. The regulatory body is seeking permanent injunctive relief, disgorgement of ill-gotten gains with pre-judgment interest, and civil penalties against all defendants. Additionally, the SEC aims for officer and director bars against Raymond J. Pirrello, Jr., Marcello Follano, Robert Cassino, Anthony DiTucci, and Joseph Rivera.

Of notable concern in the SEC's allegations is the accused individuals' purported efforts to conceal the identity of Raymond J. Pirrello, Jr., a suspected ringleader, from investors and potential employees. This concealment aimed to obfuscate the fact that Pirrello had been barred from associating with broker-dealers following an earlier SEC administrative proceeding, where he was found liable for insider trading in August 2019.

The SEC's actions underscore the regulatory scrutiny on unregistered, pre-IPO investments, especially those targeting retail investors, and demonstrate the commitment to holding individuals accountable for alleged fraudulent practices in the securities market.

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