A growing trend in the brokerage industry is for financial advisers to offer their customers access to pre-IPO “deals”. Often, investors are promised “inside access” to invest in start-ups or even well-known companies before the initial public offerings (“IPOs”), but in reality investors are just investing in some sort of venture or company that promises to acquire the pre-IPO shares.
While the sales pitch of getting in on the ground floor of growing companies can be enticing to retail investors, many pre-IPO investment “vehicles” are in fact complex products that contain hidden commissions and fees that make it nearly impossible for investors to turn a profit.
Investors should be weary of these products. While there are legitimate and profitable ways to invest in pre-IPO companies, this type of investment is highly susceptible to fraud, self-dealing, and other misconduct and these products are sometimes sold by unregistered brokers and there is even a risk that these products can be outright frauds.
Example – Keyport Venture Partners LLC Fund, a/k/a The “Pre-IPO Depot”
The United States Securities and Exchange Commission (SEC) recently brought a proceeding against Keyport Venture Advisors LLC, John M. LoPinto, and Robert R. Wilkos alleging exactly this type of scheme. Silver Law Group is currently investigating claims against LoPinto in connection with the Pre-IPO Depot, as well as other misconduct disclosed on his FINRA Brokercheck Report.
According to the SEC’s Order Instituting Administrative Proceedings:
- LoPinto and Wilkos obtained investments from individual retail investors for a pre-IPO technology company and a pre-IPO food company
- For their services, Keyport Advisors was entitled to a due diligence fee of one-to-five percent of the investors’ capital contributions, as well as a management fee and expense fee totaling three percent of the capital contributions
- Respondents made various misstatements to investors regarding their ability to secure shares of the pre-IPO companies, but collected various fees nonetheless
The SEC ultimately ordered that the Respondents in this action cease and desist from further violating federal securities laws and ordered $80,000 in fines.
Silver Law Group Represents Investors With Losses In Pre-IPO Offerings
Silver Law Group currently represents investors who have suffered losses after investing in a pre-IPO “deal” offered by their financial advisor.
Brokerage firms are obligated to investigate and understand the investments they recommend, as well as to supervise the individual brokers that are offering them, especially when they concern complex pre-IPO offerings. If you suffered losses after investing in a pre-IPO product, your broker may be liable.
Silver Law Group is experienced in representing investors in securities and investment fraud cases nationwide. Scott Silver, managing partner of Silver Law Group, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and has extensive experience representing investors in securities and investment fraud cases. Please contact us for a confidential consultation at firstname.lastname@example.org or toll free at (800) 975-4345.