INVESTORS: StraightPath Venture Partners, StraightPath Management, and its operators charged with fraud by SEC/
The SEC obtained asset freezes and other emergency relief against StraightPath Venture Partners LLC, StraightPath Management LLC, Brian K. Martinsen, Michael A. Castillero, Francine A. Lanaia, and Eric D. Lachow (collectively, the Defendants) to halt ongoing securities violations, including allegedly selling pre-Initial Public Offering (IPO) shares they did not own, pocketing undisclosed fees, and commingling investor funds, resulting in Ponzi scheme-like payments. The SEC brought charges related to fraud and registration against the Defendants.
According to the SEC’s complaint, the Defendants operated an unregistered broker-dealer with a vast network of sales agents, and raised at least $410 million from more than 2,200 investors from November 2017 through February 2022. The SEC also alleged that the Defendants repeatedly told investors that each investment would be kept separate and that they were charging no upfront fees. However, the Defendants freely commingled investor funds, paid themselves more than $75 million, and paid their sales agents nearly $48 million from illegal, undisclosed markups on the pre-IPO shares that were, in some cases, as high as 100 percent.
The SEC’s complaint alleged that a share deficit of at least $14 million existed across the funds. The Defendants also allegedly concealed from investors that two of the three founders, Castillero and Lanaia, ran the funds despite being barred from the brokerage industry. When SEC staff sought copies of the emails sent by the Defendants’ sales agents during its investigation, rather than producing them, Castillero and Martinsen allegedly deleted them from their servers and texted that “an a***hole regulator would have a field day” with a particular email.
The SEC charged the Defendants with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), 206(3), 206(4), and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.
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