SEC v. John S. Cangialosi, Jr., Peter N. Girgis, Gene “Jerry” Sarabella, et al. — U.S. Securities and Exchange Commission Litigation Release No. 26233, dated January 31, 2025.
The SEC charged seven individuals and five entities for a $70 million pre-IPO stock fraud. They allegedly raised money from over 550 investors by selling fund interests that supposedly held private company stock, but instead marked up prices significantly to pay undisclosed commissions and enrich themselves.
In Plain English
Imagine someone promising you a chance to buy a piece of a super popular company before it's available to everyone else. They claim it's a sure thing for big profits. But instead of actually getting you that special stock, they take your money, secretly add a huge markup to the price, and use that extra cash to pay themselves and their salespeople big commissions. They lied about the fees and the safety of the investment, tricking hundreds of people out of millions.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Setting up the Scheme From at least July 2021 to April 2023, defendants John S. Cangialosi, Jr., Peter N. Girgis, and Gene “Jerry” Sarabella orchestrated a fraudulent scheme using entities like Max Infinity Management LLC and Elder Fund Management LLC.
- Recruiting and Training Sales Agents The 'Max Principals' (Cangialosi, Girgis, Sarabella) hired and trained a workforce of unregistered sales agents, including Enrico A. Carini and Caner “John” Otar, to cold call potential investors.
- High-Pressure Sales Tactics Sales agents used high-pressure tactics, cold-calling thousands of potential investors, many of them senior citizens, with canned scripts and rebuttals.
- False Promises to Investors Sales agents told investors lies, including that the investment would return significant profits quickly, involved no upfront fees, and had little to no risk. They also used deceptive devices such as fake names and fabricated credentials.
- Selling Fund Interests Investors were offered interests in funds (Max Infinity Fund and Elder Fund) that supposedly held stock in private companies not yet publicly traded (pre-IPO stock).
- Secret Price Markups Despite telling investors there were no upfront fees, defendants secretly marked up the prices of these fund interests by 45% to over 100%.
- Funding Commissions and Enrichment The money from these secret markups was used to pay sizable and undisclosed commissions to the sales agents and to enrich the defendants.
- Hiding Control Defendants Cangialosi and Girgis, who had prior FINRA suspensions and bars, exercised control over the scheme, but their control was largely hidden from investors.
- Using Shell Companies The scheme operated through various entities, including Max Infinity Management, Max Infinity Venture Partners, Elder Fund Management, JJRP United Corp, and Grand Level Consulting Inc., with Lambert owning Grand Level but controlling it jointly with the Max Principals.
- Raising Millions from Investors Through these fraudulent activities, the defendants raised approximately $70 million from more than 550 investors throughout the United States by April 2023.
The Enforcement Action
On January 31, 2025, the SEC charged seven individuals and five entities in the New York Metropolitan Area for perpetrating a $70 million pre-IPO fraud scheme. The SEC’s complaint alleges violations of antifraud, securities registration, and broker-dealer registration provisions. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains together with prejudgment interest, and civil penalties from all defendants, and conduct-based injunctions and officer-and-director bars against certain individual defendants.
Named in this action: John S. Cangialosi, Jr., Peter N. Girgis, Gene “Jerry” Sarabella, Enrico A. “Ed” Carini, Caner “John” Otar, Chester E. “Chett” Scotland.