Five Brokers Linked to $525M Fraud Scheme Are Under SEC's Radar

The Securities and Exchange Commission (SEC) has brought charges against five individuals and four entities allegedly involved in a substantial fraud scheme related to pre-initial public offering (IPO) investments. Among the accused are Raymond J. Pirrello, Jr., Marcello Follano, Robert Cassino, Anthony DiTucci, Joseph Rivera, and their respective companies. These defendants are believed to have engaged in deceptive practices that led to over $525 million in unregistered offerings.

These investments drew in more than 4,000 individuals globally, enticing them with promises of no upfront fees while covertly imposing undisclosed markups. This scheme resulted in illicit profits exceeding $88 million for the defendants and their associates.

As per the complaint, Sheldon Pollock, serving as the Associate Regional Director in the New York Regional Office, highlighted that the defendants allegedly marketed unregistered securities to investors, claiming no upfront fees while purportedly channelling tens of millions through undisclosed fees for their own gain.

The accused allegedly established an extensive network of unregistered sales agents who misled investors by falsely asserting the absence of upfront fees. In reality, investors faced substantial undisclosed markups, reaching as high as 150 percent, benefiting the defendants and their sales agents.

The individuals accused supposedly concealed Raymond J. Pirrello Jr.'s involvement, concealing his past SEC sanctions related to insider trading. The SEC's complaint, filed in the US District Court for the Eastern District of New York, levied multiple violations of antifraud, securities, and broker-dealer registration laws against the defendants. The SEC seeks a permanent injunction, restitution of ill-gotten gains, and civil penalties.

In recent times, the SEC has intensified its pursuit of companies failing to register with the agency. In the previous month, the regulator initiated legal action against Kraken, a San Francisco-based crypto exchange, for allegedly operating unregistered services, encompassing securities exchange, broker, dealer, and clearing agency activities.

The charges involve claims of commingling customers funds and crypto assets with Kraken's own, echoing accusations against Binance and Coinbase. The SEC alleges Kraken operated as an exchange, broker, dealer, and clearing agency without the necessary registrations.

Kraken responded by denying accusations of fraud or market manipulation, asserting that none of the alleged funds were missing or misused. However, while Kraken did not dispute the allegation of commingling funds, it clarified that the SEC did not claim any missing or misused customer funds.