What if you could buy Amazon stock, now valued at $1631.17 per share, at just $20? Or Apple (trading at $194.17) at $15? You’d jump at the chance, right? This instinct – to get in on the ground floor of what was projected to be the largest tech IPO in history – is what one fraudster was counting on when he launched a daring plan to defraud prospective Facebook investors of millions of dollars.
An opportunity arises
Throughout 2011 and early 2012, technology and financial news outlets began reporting that Facebook would soon go public. Investors were clamoring for shares of the ever-growing Silicon Valley behemoth, but since the company wasn’t publicly traded, they had to go through private secondary markets like SharePost and SecondMarket to acquire shares from Facebook insiders and employees. In early 2011, a group of investors, who we will call QRS Capital (QRS) set out to do just that.
QRS was formed by an Investment Advisor for the express purpose of purchasing pre-IPO shares of Facebook, hoping that the investment would soon multiply based on Facebook’s projected growth and market demand. The Advisor recruited forty-six investors that eventually capitalized QRS with over $13 million.
The Billionaire's Man
After exploring multiple deals, none of which materialized, the Advisor was put in contact with a man we’ll call “James Mann.” Mann was purportedly an emissary of a Mexican billionaire , and was reportedly working on behalf of the Mexican billionaire’s company, Sylvia Securities (so named after the mogul’s wife), to obtain a substantial number of pre-IPO shares from Facebook employees who were looking to cash out some of their stock options. Mann had also aligned himself with well-respected legal counsel, financial advisors, and banking institutions and developed relationships with Facebook insiders. Mann’s comportment, credentials, and affiliations lent him the air of credibility, and as a result, the Advisor, on behalf of his investors, eventually transferred $11.25 million to Mann-affiliated accounts. The Mann/Slim construction, however, was all a façade – Mann wasn’t affiliated with the billionaire; Sylvia Securities was a straw company; and there were no shares of Facebook to be acquired.
The Scammer Unmasked
In reality, “James Mann” was hiding behind a pseudonym to mask his true identify as a fraudster known to various authorities and who had pulled brazen scams all over the world, living a lavish lifestyle financed by his victims. Mann had spun a dizzying array of stories to his targets, at different times identifying himself as a millionaire investor, friend and advisor to royalty and political leaders, director, entrepreneur, artist, film maker, screen writer, developer, speech writer, and movie producer. Over the previous fifteen years, Mann had traveled to Vancouver, Los Angeles, Boston, Fort Lauderdale, Hawaii, Cairo, Dubai, London, and Paris, bilking associates and friends of millions of dollars along the way, and leaving significant unpaid debts at almost every stop.
Recovering the victims' losses
When Mann’s Facebook con was uncovered, it appeared too late for QRS – Mann had spent nearly all, if not all, of the $11.25 million the Advisor had delivered to him in anticipation of the Facebook deal. Faced with 100% loss on their investment, QRS turned to Nystrom Beckman & Paris to investigate and prosecute claims resulting from Mann’s criminal acts. Through intensive analysis and aggressive, targeted litigation, NBP was able table to recover QRS’s lost investment.
How investors can fight back
While prevention is better than cure, no amount of investment diligence can completely protect investors against elaborate and well-constructed fraudulent schemes. And when such circumstances arise, an experienced litigation team with a track record of untangling complex financial frauds and successfully prosecuting claims against those responsible is one of the only weapons investors have to fight back.
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