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Friday, March 16, 2012

Shadow markets SEC alleges fraud in pre-IPO trading

From The New York Post - 03.15.2012

By Paul Tharp
Federal regulators said yesterday that it is anti-social to trade in pre-IPO stock fortunes of social media darlings Facebook, Twitter, Zynga, Groupon and others.
Following a yearlong probe of the shadowy trading practices in private shares of Silicon Valley's newest superstars, the Securities and Exchange Commission slapped a litany of fraud allegations against controversial broker Frank Mazzola for a trading scam based on fake and rigged pools of private shares.
The SEC accused him and entities he controlled - including Felix Investments - of skimming secret and illegal commissions, self- dealing and that he flatly lied about amount of stock the funds actually held.
More than $70 million was improperly raised from hundreds of investors who were misled in some cases into believing they owned actual private shares of the tech companies ahead of the outfits' successful initial public offerings, the SEC said.
Mazzola said he'd fight the accusations. The SEC wants him to pay penalties and disgorge unspecified gains from the actions.
Also collared in the SEC crackdown was SharesPost, which electronically matched buyers with private shares held by others in non-public companies such as Facebook.
The SEC accused the firm and its owner, Greg Brogger of Park City, Utah, of acting as a broker-dealer without being registered. The company agreed to register as a bona-fide broker-dealer and pay an $80,000 penalty, with Brogger paying an added $20,000 penalty.
The SEC said Mazzola, 44, of Upper Saddle River, NJ, defrauded one investor by saying he owned private shares of Zynga when he had none at all.
Separately, the SEC accused trader Laurence Albukerk, 44, of rigging prices of the unregistered shares passing through his EB Financial Group and Zoom Ventures, run by his wife.
Albukerk agreed to settle the case by paying a $303,000 penalty.
IPO no-no
SEC chief Mary Schapiro took enforcement action against SharesPost and two investment firms for improperly trading in shares of non-public companies.
The SEC has been looking at such trades because:
* Investors can be exposed to fraud because such companies do not have to disclose financial info
* The privately traded shares could carry restrictions
Originally published by Paul Tharp.
(c) 2012 The New York Post. Provided by ProQuest LLC. All rights Reserved.

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