The U.S.. Securities and Exchange Commission (SEC), last week accused a New York-based fund manager of running a twist on the age old Ponzi scheme by paying holders of a pre-IPO shares of Twitter Inc. with investor funds intended for pre-IPO purchases of Uber Technologies.
The SEC filed an emergency in federal court to halt Gregory W. Gray Jr. and his funds, Archipel Capital LLC and BIM Management LP, from operating the scheme that the SEC alleges paid some investors returns out of other investors money. According to the SEC action, the vehicle used to carry out the scheme was called Social Media Fund LP which purported to buy pre-IPO shares of Twitter for when the company went public. Mr. Gray raised more than $5.2 million, enough to buy 230,000 pre-IPO shares, the SEC says. But he only bought 80,000. The remaining funds were invested in another project called the Late State Fund LP, which was purportedly set up to invest in UBER and other stocks. A single investor had put $5 million in that project.
According to the SEC, Gray lured investors with the idea they could purchase highly-sought pre-IPO shares at low prices. However, rather than telling investors he didn't invest all the money raise, he stole from other investors to cover the shortfalls. The agency sought an injunction and asset freeze to halt the scheme.
The SEC complaint charges Gray and his various firms with violating the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. and seeks a temporary restraining order, permanent injunctions and disgorgement against the defendants.
If you feel you have been the victim of a ponzi scheme or other investment related fraud, contact the experienced securities fraud attorneys at Colling Gilbert Wright & Carter for a free case evaluation. You may be entitled to compensation for your losses.