Regular readers of this newsletter will be quite familiar with some of the swindles and mischief that retail investors can face in the secondaries market, thanks to Allie’s diligent reporting on the subject. And with AI companies now moving towards record-setting IPOs—with valuations in the trillions of dollars—the demand for pre-IPO shares is greater than ever, as is the opportunity for deceit.
This week, the SEC revealed details of a couple of cases involving phantom pre-IPO shares of SpaceX, OpenAI, and other hot startups. Scores of mom-and-pop investors, including some Navy veterans, were among the victims of fund advisors who claimed to be investing in pre-IPO shares of the startups, according to the SEC.
Needless to say, the fund advisors never actually bought or owned shares of any of the companies, the SEC alleges. Instead, as Amanda Gerut reports, the funds were allegedly used for everything from money-losing options trades to shopping sprees at Bloomingdale’s and on Amazon.
In one particularly seedy episode, one of the accused fund advisors allegedly spent $18,000 of fund capital on “personal entertainment” at a strip club. The fund advisor, Owen Meyer, tried to pay a $4,400 bill to the club at 4:41 a.m. using a debit card associated with Meyer Global Partners, but it was declined twice, the SEC claims.
“Just minutes later, Meyer transferred $10,000 from a fund account containing only investor money to the Meyer Global Partners account. He then allegedly paid the club $4,400 at 4:44 a.m. and then another $3,650 at 5:30 a.m. for receipts that listed drinks, ‘entertainment room rental fees,’ and included the name of Meyer’s cocktail server at the club, the SEC claims.”
In the other case, the SEC charged two men with defrauding 35 investors of more than $8.7 million through their firm, Beyond Alpha Ventures. According to the SEC, the two partners pitched investors on a trading fund with 153% net returns plus pre-IPO stakes in crypto exchange Kraken and AI software firm SandboxAQ.
“The SEC claims the trading fund lost money in 13 of 14 months, and less than half the nearly $6 million raised for pre-IPO deals went into them. Much of the rest went into options trading that was later lost, the complaint states. The two allegedly sent fake statements to investors, including one … ‘hand-delivered’ to a Navy veteran couple saying their $750,000 investment had grown to $4.1 million.” One of the partners, reached by Fortune, called the allegations “completely false.” The other partner, as well as Meyer, did not respond to requests for comment.
If nothing else, the cases are a reminder that even as we fret about the novel risks of AI technology, the world is still full of old-fashioned dangers. Read Amanda’s full story here.
Alexei Oreskovic
alexei.oreskovic@fortune.com
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VENTURE CAPITAL
- Volantis, a San Francisco-based semiconductor company developing photonic AI inference systems, raised $88 million in Series A funding. Lachy Groom and Abstract Ventures led the round.
- Metaview, a San Francisco-based agentic recruiting platform, raised $60 million in Series C funding. Insight Partners led the round.
- doxx.net, a Miami, Fla-based developer of an agentic defined networking platform, raised $38 million in Series A funding. Andreessen Horowitz led the round and was joined by Animo Ventures and Focal.vc.
- Halluminate, a San Francisco-based developer of AI training environments for financial work, raised $30 million in Series A funding. Oak HC/FT led the round.
- Restate, a Berlin, Germany and San Francisco-based developer of durable execution infrastructure, raised $20 million in Series A funding. Singular led the round and was joined by Redpoint Ventures and Capital One Ventures.
- Arceus, a San Francisco-based law firm, raised $17 million in funding. Greycroft led the round and was joined by Craft Ventures, South Park Commons, and others.
- Novele, a Stamford, Conn., and Irvine, Calif.-based applied AI company for energy in the built environment, raised $17 million in Series A funding. Boisei Labs led the round and was joined by Locke Health, Arup Ventures, and others.
- Daptic, a New York City-based developer of software for manufacturers to design products for regulation, raised $15 million in Series A funding. Canvas Ventures led the round and was joined by IA Ventures, 8VC, and others.
- Parakeet Health, a San Francisco-based healthcare AI company, raised $10 million in Series A funding. Canvas Ventures led the round and was joined by Blank Space Ventures, StoryHouse Ventures, and HMC INQ.
PRIVATE EQUITY
- Nearly Natural, a portfolio company of Centre Partners, acquired Modernized Pottery, a Dallas, Texas-based design-forward line of 3D-printed, eco-friendly planters and related home décor products. Financial terms were not disclosed.
- One Equity Partners acquired a majority stake in Myriad360, a New York City-based services-led global systems integrator. Financial terms were not disclosed.
- Trading Technologies, backed by Thoma Bravo and 7RIDGE, acquired TRAFIX, a Mineola, N.Y.-based trading technology company. Financial terms were not disclosed.
- Warner Pacific, backed by Lovell Minnick, acquired Beere&Purves, a Walnut Creek, Calif.-based general agency. Financial terms were not disclosed.
EXITS
- One Equity Partners acquired United WELD Holdings, the Baton Rouge, La.-based parent company of EPIC Piping and BendTec, from Bernhard Capital Partners. Financial terms were not disclosed.
PEOPLE
- 645 Ventures, a New York City-based venture firm, hired Clare Brandfonbrener as a Senior Associate. Previously, she was with Alumni Ventures.