Pre-Facebook IPO Purchases and a Lifetime Bar
The SEC accepted an offer of settlement from Anthony Coronati (“Coronati”) in which he agreed to disgorge a sum of $400,000 and consented to a Cease and Desist Order pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934, Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940. See In re Anthony Coronati and Bidtoask LLC, Securities Act Release No. 9666 (Admin Proc. Oct. 17, 2014).
According to the allegations (that were neither admitted nor denied in the settlement), Coronati, from 2008 to 2013, raised nearly $2 million from investors in various fraudulent securities offerings, misappropriating nearly $400,000 of the funds. Coronati sold investments in what the SEC described as a “fictitious . . . Fund.” He convinced investors that managers of the Fund were looking for a “30% return with minimal risk.” In other instances, he sought investors by representing that shares would increase in value as a result of an IPO. According to the Commission, Coronati “had no basis for representing that [the Fund] would soon hold an IPO or that its stock would soon be worth many times the price investors had paid.”
Coronati also offered membership interests in Bidtoask, LLC, “falsely represent[ing] that Bidtoask would invest directly in pre-IPO Facebook shares without charging any fees, commissions, or mark-ups.” Coronati raised $1.75 million from forty-four investors, misappropriating, according to the Commission allegations, $100,000 of these investments. In addition, he invested the remaining funds in two investment funds that held Facebook shares while knowing that the “Funds charged Bidtoask fees . . . that reduced Bidtoask’s investments in the Facebook Funds to less than $1.55 million.”
The Commission alleged other false offerings and alleged that at least some funds were used to repay investors in a Ponzi-scheme fashion. Id. (“Coronati used money he misappropriated from investors in one offering to pay back investors in another offering, in Ponzi-like fashion.”).
In the settled case, the SEC found that Coronati and Bidtoask willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Sections 206(1), 206(2), and 206(4) of the Advisors Act and Rule 206(4)-8 thereunder. Coronati settled without admitting or denying the allegations but agreed to disgorge $292,646.36, pay $7,353.64 in prejudgment interest, $100,000 in civil penalties, and to accept a permanent bar from the securities industry.
The primary materials for this case can be found on the DU Corporate Governance website.