SEC Freezes Assets of StraightPath and Barred Brokers over Alleged $410 Million Fraud Scheme
According to a press announcement on May 13, 2022, the Securities and Exchange Commission announced that it obtained asset freezes and other emergency relief against StraightPath Venture Partners LLC, StraightPath Management LLC, and four individuals to halt allegedly ongoing securities violations, including allegedly selling pre-Initial Public Offering (IPO) shares they did not own, pocketing undisclosed fees, and commingling investor funds, resulting in Ponzi scheme-like payments.
The SEC alleges that StraightPath and the individuals were running an unregistered broker-dealer with a massive network of sales agents that raised at least $410 million from more than 2,200 investors from November 2017 through February 2022.
The SEC further alleges that the Defendants repeatedly told investors that each investment would be kept separate and that they were charging no upfront fees, but the Defendants purportedly commingled investor funds, paid themselves more than $75 million, and paid their sales agents nearly $48 million from allegedly illegal, undisclosed markups on the pre-IPO shares that were, in some cases, as high as 100 percent.
According to the SEC, a share deficit allegedly exists of at least $14 million across the funds. Investors were reportedly unaware that two of the three founders were overseeing the funds despite being barred from the brokerage industry. These individuals allegedly deleted emails sent by the Defendants’ sales agents during its investigation, rather than producing them, as requested by the SEC.
The SEC’s complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC obtained a court order to freeze the assets of three individuals and StraightPath Venture Partners, and StraightPath Management. The order further temporarily enjoins the Defendants from violating these provisions of the federal securities laws and orders them not to destroy any additional relevant documents. A hearing on the SEC’s application, which also seeks the appointment of a receiver, will be held on May 26, 2022.
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Tags: securities fraud attorneys, Straightpath ponzi scheme, StraightPath Venture Partners complaints, StraightPath Venture Partners LLC Investigation, StraightPath Venture Partners LLC options, StraightPath Venture Partners LLC sanctions Last modified: May 17, 2022