SEC sues Florida firm that raised $410 million over IPO-related fraud filings

NEW YORK, May 13 (Reuters) – The U.S. Securities and Exchange Commission on Friday sued a Florida company that allegedly raised at least $410 million by fraudulently promising investors access to private companies that might proceed to IPOs.

In a civil complaint filed in Manhattan federal court, the SEC also requested an asset freeze against StraightPath Venture Partners LLC and its three founders, and the appointment of a receiver to stop “ongoing fraud” within the company. ‘business.

The SEC said StraightPath touts its investment vehicles as a way for ordinary investors to hold “coveted” and hard-to-find pre-IPO shares in companies such as plant-based burger maker Impossible Foods and the Kraken cryptocurrency exchange.

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But the SEC said the Jupiter, Fla.-based company often ran out of stock to back investments, made “Ponzi-like” payments to certain investors and improperly mixed investor and company assets.

He also said that StraightPath charges “exorbitant and undisclosed fees”, allowing founders Michael Castillero, Francine Lanaia and Brian Martinsen and fund manager Eric Lachow to pay themselves around $75 million and their sales agents nearly $48 million. of dollars.

StraightPath says it charges investors a one-time “due diligence” fee of 5%, plus a 2% management fee and 1% expense fee.

In a letter to U.S. District Judge Lewis Kaplan, StraightPath attorneys called the SEC’s requests “completely unwarranted,” citing the firm’s years of cooperation and saying StraightPath presented a danger “contrary to credulity.”

Lawyers for StraightPath also said the SEC “apparently prompted” the US Department of Justice to open a grand jury investigation into the company, and that the asset freeze could interfere with individual defendants’ defenses against that investigation. criminal.

The Justice Department did not immediately respond to a request for comment.

According to court documents, StraightPath raised $410 million from more than 2,200 investors in at least 14 countries between November 2017 and February 2022, when it agreed with the SEC to stop soliciting new investments.

The SEC said StraightPath funds held more than $200 million in securities, but were short $14 million in pre-IPO stock for seven companies, including Impossible Foods and Kraken.

The case is SEC v StraightPath Venture Partners LLC et al, US District Court, Southern District of New York, No. 22-03897.

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Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis, Barbara Lewis and Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

About Charles D. Goolsby

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