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The three are Long Island resident Mario Gogliormella, age 47, of Manhasset; and New York City residents Steven Lacaj, age 27, of Manhattan, and Karim Ibrahim, age 34, of Queens, also known as “Chris Hayes."
“By allegedly raising approximately $185 million from over 1,400 investors, Mario Gogliormella, Steven Lacaj, and Karim Ibrahim left a trail of shattered trust and financial ruin," US Attorney for the Southern District of New York Damian Williams said.
The three were each charged with:
- One count of conspiracy to commit securities fraud, wire fraud, and investment adviser fraud, which carries a maximum potential sentence of five years in prison;
- One count of securities fraud, which carries a maximum potential sentence of 20 years in prison;
- One count of wire fraud, which carries a maximum potential sentence of 20 years in prison;
- One count of investment advisor fraud, which carries a maximum potential sentence of five years in prison.
According to the allegations in the Indictment:
From about 2019 through at least October 2022, Gogliormella, Lacaj, and Ibrahim engaged in a scheme to defraud investors in a group of related private funds known generally as the “StraightPath Funds” and the “Legend Funds."
The three, along with others working under their direction, used "boiler room" style call centers to promote the funds to individual, non-professional investors.
They presented an opportunity to invest in privately held companies that were expected to go public soon (pre-IPO companies).
Gogliormella, Lacaj, and Ibrahim claimed to offer investors the chance to buy shares in pre-IPO companies at favorable prices before an anticipated public offering, stating that the shares would be worth much more at that time.
The three and their agents told existing and potential investors in the funds that they did not earn any upfront fees or commission when acquiring pre-IPO shares for the funds.
However, in reality, they bought the shares and then sold them to the funds at inflated prices without disclosing the markup to the investors.
Gogliormella, Lacaj, and Ibrahim also misled investors about the nature of their investments and concealed the involvement of the three, who had previously been disciplined by the Financial Industry Regulatory Authority (FINRA) for managing the funds.
Additionally, the defendants destroyed records and obstructed the efforts of the US Securities and Exchange Commission (“SEC”) to uncover their fraud on investors.
In order to generate interest in the funds among retail investors, the three used finders, or “referral agents,” to pitch prospective investors and thereafter to serve as the investors’ primary point of contact.
In addition to misleading prospective investors about the compensation paid to referral agents, the three defrauded investors in the funds, for which they acted as fiduciaries, by charging them excessive and undisclosed markups on the share prices of pre-IPO companies. This benefited the defendants and their associates at the expense of investors and the funds.
These markups regularly exceeded 50 percent of the price at which Legend had acquired the shares and sometimes were as high as 150 percent. These markups, in turn, were used to pay fees and commissions to the defendants and their sales representatives.
Gogliormella, Lacaj, and Ibrahim used much of these investor funds to enrich themselves and their associates and referral agents.
Gogliormella, Lacaj, and Ibrahim received a total of more than $28 million in investors’ funds.
For the most part, these distributions were not disclosed to investors or made in accordance with the funds’ offering documents.
Gogliormella, Lacaj, and Ibrahim also paid at least $17.5 million in investor funds to their associates and referral agents, despite having made and caused to be made explicit representations to investors that fees were not being charged or were being waived.
In all, approximately 25 percent of the capital contributions the Funds received from investors was diverted to pay the defendants and their associates.
The funds are no longer operational and are under the control of court-appointed receivers, who are tasked with taking possession of the funds’ assets and recommending a plan to return value to investors.
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