A Long Island, N.Y.–based investment advisor pleaded guilty to charges of securities fraud for falsely soliciting investments in companies before their initial public offerings (IPO).
The guilty plea from Mark Lisser, 40, comes several months after the SEC charged him for the scheme, arguing Lisser had run two boiler rooms in Long Island and Boca Raton, Fla., raising about $2.1 million from at least 71 investors and misappropriating more than $900,000.
According to the DOJ, Lisser, of Massapequa, N.Y., was a partner in Knightsbridge Private Partners, which used a number of websites and call centers to entice clients to invest in pre-IPO shares for a number of unnamed companies. Between October 2018 and January 2019, Lisser and others at the firm would contact potential investors, claiming they already owned the pre-IPO shares and that the firm was in the capitalization table and did not earn commissions or fees until investors made a profit from the companies going public, according to an affidavit filed by a federal agent who investigated the case.
But none of these claims was true, and Lisser knew that he and other members of the firm would be pocketing money from commissions at the time of the investment, not when the companies later went public. Lisser used about $700,000 of funds raised from clients to “make payments to companies controlled by Knightsbridge employees, pay salaries and sales commissions, pay his personal credit card bill and make payments on a mortgage,” according to the affidavit.
Despite telling potential investors it already owned the shares, Knightsbridge entered into “several subscription agreements and share purchase agreements” to purchase pre-IPO shares from two unregistered investment funds, according to the SEC complaint. In some instances, the agreements meant the shares would directly be transferred to the firm, or they’d transfer an interest in a fund holding those shares. This meant the firm had not yet purchased the pre-IPO shares for marketing interests to investors.
“This introduced further undisclosed risk in the transactions because there was no guarantee that Lisser and Knightsbridge would, in fact, be able to purchase the necessary shares of the three companies at all or at an advantageous price,” the complaint read.
Lisser was previously registered as a broker, and worked at six different firms between 2001 and 2016 (four of which were later expelled from the industry by FINRA, according to Lisser’s BrokerCheck profile). According to the SEC complaint, Lisser concealed his previous regulatory history from Knightsbridge investors, going as far as identifying himself as “Mark Allen” in an attempt to stop investors from researching him and finding out about his history.
The DOJ did not indicate what the potential sentencing could be for Lisser, and the SEC’s complaint clarified that it was seeking disgorgement from ill-gotten gains along with civil penalties from the advisor.
In a statement accompanying the announcement of the guilty plea, Mark J. Lesko, the acting U.S. attorney for the Eastern District of New York, thanked the FBI and the SEC for helping develop the case against Lisser.
“With today’s guilty plea, the defendant admits to personally profiting from the false representations he made to his customers about the nature of their investments in valuable pre-IPO companies,” he said.