SEC Charges Individuals for Selling Pre-IPO Shares Without Being Registered Broker-Dealers and Misleading Investors about Fees

The Securities and Exchange Commission charged three individuals with selling pre-IPO company interests on behalf of StraightPath Venture Partners LLC. Scott Hollender Jr., Gabriel Migliano and Frank Vecchio were accused of misleading their investors about fees and operating as unregistered brokerages. The charges come after StraightPath Venture Partners and StraightPath Management LLC were accused of a $410,000,000 fraud in May 2022.

According to the SEC’s complaint, Hollender Migliano Vecchio actively solicited investment between November 2017 and Nov 2021. They advertised funds that were set up as series of LLCs, which claimed to be able to purchase shares in a single pre IPO company. Although they were not registered as brokers the defendants provided marketing material to investors, gave them advice on investments, and received a transaction-based payment. Collectively, they solicited $13 million in investments from 115 investors. The defendants were paid upfront commissions in the amount of 10 percent but they misled investors into believing that there was no upfront fee. The defendants received approximately $3.7 in transaction-based compensation.

In its complaint to the U.S. District Court of New York’s Southern District, the SEC charges the defendants of violations of securities laws. The complaint is seeking permanent injunctive measures, civil penalties, and the return of gains that were ill-gotten. GSH Empire Inc. (an entity controlled by Hollender) and 21st Century Gold & Silver Inc. (controlled by Vecchio), are named as defendants in the complaint to recover gains allegedly generated.

New York Regional Office continues to conduct the SEC’s investigations. The SEC will lead the litigation. Financial Industry Regulatory Authority and the Office of the Montana State Auditor Commissioner of Securities and Insurance and the New Jersey Bureau of Securities assisted in this case.

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Securities and Exchange Commission, or SEC for short, is the regulatory agency of the United States. It oversees and enforces securities laws. Its primary goal is to protect investors, and maintain fair and efficient market conditions.

The SEC regulates and supervises various participants in this industry including brokers, dealers and investment advisors. The SEC ensures that all of these entities adhere to the rules and regulations intended to promote transparency, investor confidence, and integrity.

SEC is a key player in making sure that companies are providing accurate and timely financial information to their investors. They do this by requiring disclosure of relevant information. The SEC also monitors the insider trading and enforces regulations against fraudulent and manipulative securities market practices.

The SEC can also bring civil enforcement proceedings against individuals or businesses that violate securities law. It conducts investigations, audits, and exams, and can impose sanctions and penalties if needed.

The SEC promotes a fair and efficient financial system by protecting investors and facilitating capital creation. This benefits individual investors as much as it does the overall economy.

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