Three men pleaded guilty to various charges for their role in a US$500-million investment fraud scheme that sold investors on the promise of buying into companies on the verge of going public.
In 2023, U.S. authorities alleged that investors were defrauded in offerings from a New Jersey-based investment fund manager, Late Stage Management, LLC, that provided access to pre-IPO companies — but didn’t disclose that investors were being charged large fees and markups (in some cases as high as 150%) on those sales by the fund manager and unregistered sales agents, including Prior2IPO and Pre IPO Marketing, Inc.
Between March 2019 and July 2022, the firms raised approximately US$528 million from investors, and allegedly diverted approximately US$88 million in undisclosed upfront fees and markups, U.S. authorities alleged.
Now, three men have pleaded guilty for their role in the scheme.
In a federal court in New York, Raymond John Pirello, Jr. and Joseph Passalaqua pleaded guilty to all three counts in an indictment that charged them with securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud. On Feb. 18, their co-defendant, Robert Cassino, pleaded guilty to wire fraud conspiracy.
According to U.S. court filings, Passalaqua was CEO of Prior2IPO and Cassino headed up Pre IPO Marketing, while Pirello, who was previously banned by the U.S. Securities and Exchange Commission (SEC), helped lead Late Stage.
Alongside the criminal charges, the SEC has also brought regulatory enforcement action against Pirello, Cassino and their companies, along with three other men, alleging that they violated securities law.
In that case, the SEC is seeking permanent injunctive relief, disgorgement of allegedly ill-gotten gains with interest, civil penalties, and officer and director bans.