If It Sounds to Good to Be True…SEC Issues Warning Regarding Pre-IPO Scams

by Wall Street Fraud on May 3, 2012

Investment fraud lawsuitThe SEC’s Office of Investor Education and Advocacy recently issued an updated Investor Alert to warn investors about investment scams that purport to offer investors the opportunity to buy pre-IPO shares of companies, including social media and technology companies such as Facebook and Twitter. SEC staff is aware of a number of complaints and inquiries about these types of investment frauds, which may be promoted on social media and Internet sites, by telephone, email, in person, or by other means.

The SEC also highlights that its Division of Enforcement continues to take action in this area. On April 4, 2012, the U.S. District Court for the Southern District of Florida in Miami issued an Order to Show Cause and Other Emergency Relief to halt a defendant’s fraudulent sale of securities of an investment vehicle that he falsely represented owned pre-IPO shares of Facebook, Inc.

In that matter, the SEC alleges that Allen Weintraub, using entities with names such as “Private Stock Transfer, Inc.,” “PST Investments III, Inc.,” and “World Financial Solutions” falsely represented that he would sell the investors pre-IPO shares of Facebook, Inc., and that PST Investments had an ownership interest in Facebook stock. According to court documents, Weintraub utilized the website privatestocktransfer.com to perpetrate his scheme.

While legitimate offerings of pre-IPO shares in a company are not uncommon, unregistered offerings may violate federal securities laws unless they meet a registration exemption, such as restricting the private offering to “accredited investors” -- investors who meet certain income or net worth requirements.  Therefore, investors should be cautious of the risks involved with an offer to purchase pre-IPO shares in a company.

As with any investment, the SEC encourages investors to research thoroughly both the investment product and the professional offering the product before making any investment decision.

If you have been the victim of pre-IPO fraud, we may be able to help you recover your losses. Contact us today at 215-839-3953 for a free consultation.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud or negligence, please contact our securities fraud attorneys today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses

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