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The SEC Charges 3 in the Secondary Markets

Trading in privately held and pre-IPO markets has surged, leading to potential fraud and misrepresentation


Yesterday the Securities & Exchange Commission filed charges against the operators of two investment funds that focus on pre-IPO shares such as Facebook and Twitter. There was also a settlement with SharesPost, a company that enables the purchase of shares of privately held companies through an online exchange.

Over the past few years, trading activity in these gray markets has surged, which has alerted the SEC to potential fraud and misrepresentation to investors.

Now the SEC has charged the founder of EB Financial Group, Laurence Albukerk, with not adequately disclosing fees. Albukerk has agreed to give back $210,499 in profits and pay a penalty of $100,000.

But in the SEC’s charge against Frank Mazzola, who runs Felix Investments LLC, there has been no resolution. The agency’s lawsuit not only alleges false statements about fees but also misrepresentations about ownership of certain shares, such as Zynga‘s (NASDAQ:ZNGA).

In the case against SharesPost, the SEC said the company should have been registered as a broker dealer. The company agreed to settle the matter by paying $80,000.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

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