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NYC Pre-IPO Investment Scams Lawyers

November 15, 2016 Federal Criminal Attorneys

An initial public offering (IPO) occurs when a company sells its stock shares to the public for the first time. A major financial institution or investment bank typically underwrites the IPO, and there a number of requirements that go hand-in-hand with taking a company public.

However, in some cases, before an IPO occurs, a pre-IPO may take place. In a pre-IPO, a limited number of shares are available on special trading platforms for pre-IPOs, or shares of a company stock are available to certain investors. Typically, hedge funds, large private equity funds and other institutional investors purchase shares during the pre-IPO, but in some cases, a pre-IPO is available to a larger group of private investors.

Although taking advantage of pre-IPO offerings can provide a company with a chance to raise funds before the IPO while also giving knowledgeable investors to get in on the ground floor of a company, there is also an opportunity for scams and fraud to happen as well. Regardless of the type of pre-IPO investment scam, schemes or misrepresentations regarding securities sales can lead to significant criminal charges.

The legal team at Spodek Law Group, PC provides legal presentation in both criminal cases as well as SEC civil actions. If you are facing criminal prosecution, legal actions by federal authorities or a tort lawsuit, contact us today. Our pre-IPO investment scam defense lawyers can provide an aggressive approach to help you work through your legal problems. Ready to get started? Contact us today.

Overview of Pre-IPO Scams

By definition, a pre-IPO involves misrepresentation, fraud or a direct intent to mislead investors regarding stock shares sales for a company awaiting its IPO. There a number of ways that pre-IPO scams occur such as:

– The sale of unregistered securities. Companies that want to offer securities or sell shares must either register with the Securities and Exchange Commission or qualify for an exemption. Selling unregistered securities is illegal, but it is one of the most common forms of pre-IPO investment schemes.

– The sale of pre-IPO shares for a company that never goes public or does not exist. Investors are offered the chance to purchase shares of a company expected to go public, but the company may be false and not even exist. The investors’ money is subsequently embezzled.

– The sale of IPO shares without authorization. A defendant may embezzle client money for his own use, selling shares of stock he neither owns nor has the authority to sell. According to the Securities and Exchange Commission, one defendant was convicted after obtaining more than $3.7 million by offering fraudulent pre-IPO stock shares of well-known corporations before the companies IPOs occurred.

How are IPO Scams Different?

Pre-IPO investment fraud and IPO investment fraud differ in that the latter involves attempts to mislead or scam individuals with a company that is making shares available to the public. Both companies going public as well as large financial institutions involved in the underwriting of the IPOs. For instance, investment banks and companies may mislead potential buyers regarding the financial condition of a company.

A company must make certain financial disclosures when it goes public. If the company or bank provides misleading or false information, this type of IPO investment fraud can result in severe penalties for the investment banks underwriting the IPO as well as for CEOS and other high-ranking company officials who signed off on the fraudulent statements.

Penalties for IPO Fraud

In cases where someone intentionally makes false statements regarding the sale of securities, IPO fraud is considered a crime. In addition, if the defendant makes the states via wire communication or postal mail, he or she may face additional federal offenses such as:

– Wire fraud
Mail fraud
– Securities fraud

IPO investment fraud may also lead to SEC enforcement actions and criminal charges under New York State law, so it is important to act as soon as possible if you have been accused of participating in a pre-IPO or IPO investment scam.

A Pre-IPO Investment Scam Lawyer Can Help

Call the legal team at Spodek Law Group, PC today if you are facing accusations of involvement in connection with a pre-IPO investment scheme. We can review your case and help you to build a solid defense in order to fight against the criminal charges.



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