March 23, 203/US SEC
The Securities and Exchange Commission today charged Scott Hollender, Gabriel Migliano, Jr., and Frank Vecchio for selling interests in shares of pre-IPO companies on behalf of StraightPath Venture Partners LLC, despite not being registered broker-dealers, and for misleading investors about the fees associated with those investments. The Commission previously charged StraightPath Venture Partners, StraightPath Management LLC, and its four principals in May 2022 in connection with a $410 million fraud.
The SEC complaint alleges that, between November 2017 and November 2021, Hollender, Migliano, and Vecchio actively solicited investments for interests in funds that were set up as series LLCs, each of which purported to acquire shares of a single pre-IPO company. The defendants allegedly provided investors with marketing materials, advised investors on the supposed merits of the investments, and received transaction-based compensation, all hallmarks of a broker, despite not being registered as brokers. As alleged in the complaint, defendants collectively solicited at least $13 million in investments from at least 115 investors, and, even though each of the defendants received upfront commissions of approximately 10 percent on investments they successfully solicited, the defendants falsely told investors that there were no upfront fees associated with their investments. According to the complaint, the defendants collectively received at least approximately $3.7 million in transaction-based compensation.
“StraightPath Venture Partners could not have cheated investors without the unregistered sales agents who fraudulently solicited them,” said Antonia M. Apps, Director of the New York Regional Office. “The SEC will continue to hold individuals accountable for their wrongdoing, including a failure to register.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges defendants with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The complaint also names GSH Empire Inc. and 21st Century Gold & Silver Inc., entities controlled by Hollender and Vecchio, respectively, as relief defendants for purposes of recovering ill-gotten gains that Hollender and Vecchio generated through their alleged conduct.
The SEC’s ongoing investigation is being conducted by Megan R. Genet, Tian Wen, Douglas J. Smith, Lee A. Greenwood, Daniel Loss, Patricia Schrage, Alistaire Bambach, and Steven G. Rawlings of the New York Regional Office (NYRO), with assistance from Suman Beros. It is being supervised by Sheldon L. Pollock. The litigation will be led by Mr. Loss, Ms. Wen, and Ms. Genet. Assistance was provided by Ronald Krietzman, Michael McAuliffe, and Stephen DeBella of the NYRO Broker-Dealer and Exchange Program. The SEC appreciates the assistance of the Financial Industry Regulatory Authority; the Office of the Montana State Auditor, Commissioner of Securities and Insurance; and the New Jersey Bureau of Securities.
Investors can learn more about the risks of working with unregistered investment professionals by reading such SEC investor bulletins as 10 Red Flags That An Unregistered Offering May Be A Scam and Private Placements Under Regulation D.