The SEC and FINRA have responded to the increased popularity in owning private shares of major technology companies such as Facebook and Twitter by stepping up enforcement of the pre-IPO market.
The SEC recently charged Frank Mazzola and his two private investment funds (Felix Investments, LLC and Facie Libre Management Associates, LLC) with securities fraud. The funds were established solely to acquire shares in Facebook and other tech firms with securities fraud. The SEC has alleged that these firms misled investors and pocketed undisclosed fees and secret commissions.
While fund managers are required to fully disclose material conflicts of interest and their compensation, Mazzola and his firms allegedly failed to do so. Mazzola, Felix, and Facie Libre also earned commissions above and beyond the 5% commission that was disclosed in offering materials during the acquisition of Facebook stock. To make matters worse, Mazzola and his firms allegedly mislead investors into believing Felix and Facie Libre had ownership in stock of certain tech companies such as Facebook and Zynga, and made false statements which inflated the revenue of Twitter to attract investors. According to the SEC and FINRA, Mazzola improperly raised over $70 million from investors using such deceitful tactics.
The SEC complaint against Mazzola, Felix, and Facie Libre request that they be permanently enjoined from violating the various securities laws and to disgorge any and all wrongfully obtained benefits.
It is important for investors to use caution and diligence when investing in pre-IPO stocks because they typically lack the type of public disclosures that are required for public stock. If you have been a victim of broker fraud or negligence the attorneys at Cosgrove Law, LLC may be able to help you recover your losses.