Hot Tech Companies at Center of $11 Million Investment Fraud Scheme

by Wall Street Fraud on December 6, 2011

Investment fraud lawsuitFlorida businessman John A. Mattera was arrested last week after he defrauded investors by falsely claiming he owned shares of hot tech companies that have not yet gone public, including Facebook Inc. and Groupon Inc. He is facing charges of securities fraud, wire fraud, and money laundering in connection with the $11 million investment scheme.

According to a complaint unsealed today in Manhattan federal court:

In 2010 and 2011, Mattera controlled and held himself out as chairman of the Advisory Board of Praetorian Global Fund Ltd., a professional mutual fund. In that capacity, Mattera exercised the day-to-day management decisions for the company.

Beginning in the late summer of 2010, Mattera and others promoted to investors the opportunity to invest in special purpose entities related to Praetorian (the G Power Entities). Mattera falsely represented that the G Power Entities owned shares in the stocks of private companies such as Facebook and Groupon, among others.

Ownership of stock in these private companies was particularly attractive because, as Mattera and others represented, there was an expectation that an initial public offering would soon occur, thereby increasing the value of the shares. However, as Mattera well knew, neither he, Praetorian nor the G Power Entities held these shares of stock.

Based on the misrepresentations of Mattera and others, investors sent more than $11 million into escrow accounts maintained at a Florida bank. Mattera reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place, at which time the investors would receive their ownership interest in the particular special purpose entity.

However, instead of maintaining the investor money in the escrow accounts as he promised, Mattera caused the vast majority of it to be transferred to other entities with which he was associated. Ultimately, Mattera misappropriated more than $11 million of investor money and spent nearly $4 million on personal items for his family and himself, such as expensive jewelry, interior decorating, and luxury cars.

Source: Stopfraud.gov

The Message for Investors

Unfortunately, this is not the first investment scam looking to capitalize on investors’ desire to “get in on the ground floor” when it comes to highly anticipated initial public offerings. Investors should be very skeptical of any investment professional that purports to own rights to shares of coveted stock in Facebook and other companies that have not yet gone public.

If you have been the victim of a pre-IPO securities 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, please contact us 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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