Pre-IPO tech stock sales investigated by regulators by Tom Huddleston, Jr. @FortuneMagazine 10:17 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons A new investigation launched by U.S. securities regulators is looking into the sale of private technology stocks to determine if certain hedge funds and other investors are improperly trading those shares. The early-stage Securities and Exchange Commission probe is focused on an uptick in sales of pre-IPO shares of buzzy tech startups by middlemen at a time when valuations for those companies have climbed higher and higher, according to anonymous sources cited in a new report from The Wall Street Journal. The SEC is also investigating the sale of employee-owned shares of private companies in transactions that are sometimes forbidden by those companies and can violate the Dodd-Frank Act. According to WSJ, the SEC probe includes one hedge fund manager who, earlier this year, tried lining up investors to support a $100 million fund to invest in Uber stock. The manager, Artist Capital’s Jonathan Sands, told investors he was getting the stock “directly” from Uber until the ride-hailing startup’s lawyers learned of his deception and asked him to stop. The investigation comes at a time when funding for private tech companies is piling up, sending the pre-IPO valuations of tech startups like the $50 billion Uber sky high. Last year, venture capital funding for tech startups increased 25%, to nearly $65 billion. Last month, the SEC announced an enforcement action against Silicon Valley startup Sand Hill Exchange for selling security-based swaps contracts to investors outside a national securities exchange and without proper registration statements. Sand Hill settled the SEC’s charges and agreed to pay a $20,000 penalty.