The allegations read: Plaintiff securities and exchange commission (commission), for its complaint against defendants mario gogliormella, steven lacaj, and karim ibrahim (collectively, defendants) and relief defendant, alleges the defendants operated boiler rooms using a network of unregistered sales agents to conduct illegal, unregistered, and fraudulent offerings of securities, in the form of interests in investment vehicles that purportedly gave investors access to shares (pre-ipo shares) of private companies that were on the verge of going public (pre-ipo companies). Boiler rooms are call centers that typically use high-pressure sales tactics and intensive, high-volume sales campaigns to induce investors to buy securities. Defendants and their unregistered salesforce sold pre-ipo shares on behalf of straightpath venture partners llc (straightpath) and raised at least $149 million. The commission previously brought an emergency action against straightpath and its principals, no. 22-cv-3897 (sdny). As straightpath was under the scrutiny of the commission, defendants launched a new entity, legend venture partners llc (legend). Defendants operated legend and, together with their salesforce, raised over $35 million from investors, a majority of whom had earlier invested with straightpath. The commission previously brought an emergency action against legend, no. 23-cv-5326 (sdny). Defendants falsely lead investors to believe that straightpath and legend would only make money when investors did, and that investors would not pay any upfront fees or commissions. In exchange for their investments, straightpath and legend investors received interests in a subdivision (called a series) of one of nine straightpath investment funds (the straightpath funds) or one of five legend investment funds (the legend funds). Defendants and their salesforce told investors that each series invested in pre-ipo shares of a particular pre-ipo company. Defendants and their salesforce pitched these series interests as a way for retail investors to effectively own limited supply pre-ipo shares that could not yet be bought on a public stock exchange, and at prices purportedly lower than the current valuations and anticipated public listing prices of those shares. Using sales scripts provided by defendants and at their direction, the salesforce told investors that straightpath or legend would charge only a 20% fee on back-end profits (if any) earned after the applicable company went public. This led investors to believe that their interests were fully aligned with defendants' interests, however, these purchases hadundisclosed markups that averaged between 19% and 105% above the prices straightpath or legend had paid, or would pay, for the pre-ipo shares. Defendants and their salesforce pocketed for themselves more than $45 million in fees. Through their salesforce, defendants made additional misrepresentations to investors. In legend's offering documents, defendants also concealed the involvement of gogliormella and k. Ibrahim, both of whom had been the subject of public customer complaints and the latter of whom had been suspended by finra for having previously defrauded a customer. As a result of defendants' fraud, investors suffered substantial harm. Investors expended significant funds acquiring interests in the straightpath and legend funds based on the material misrepresentations. In many instances, the pre-ipo companies at issue have not gone public even years later. While defendants have used investor proceeds to fund lavish lifestyles and make many luxury purchases. In connection with their fraudulent scheme, defendants also violated the securities and broker-dealer registration provisions of the federal securities laws. Defendants and their salesforce, all of whom received transaction-based compensation, acted as brokers without being registered as broker-dealers or associated with registered broker-dealers.
