August 16, 2026  ·  Complaint filed August 14, 2026  ·  nysd, No. 1:26-cv-06958

Newman News, By David Brunk

Read the filing

SEC v. Spaventa Accuses Pre-IPO Funds of 46% Hidden Fees, Boiler-Room Tactics

Markups on Stripe, Anduril Shares Allegedly Concealed

The Securities and Exchange Commission alleges that Andrew Spaventa and three affiliated entities—The Spaventa Group LLC ("TSG"), TSG Capital Advisors LLC ("Capital Advisors"), and TSG Alpha Partners LLC ("Alpha Partners")—raised $74 million from more than 800 investors through eleven private funds while charging hidden fees averaging 46% by marking up the prices of pre-IPO securities. The complaint, filed in the U.S. District Court for the Southern District of New York, alleges that investors were told the prices reflected the value of the shares. "Defendants pitched these offerings as unique investment opportunities in highly-coveted, limited-supply shares not yet available on a public stock exchange," the complaint states (Compl. ¶2).

The complaint details specific markups across the eleven funds. For example, one fund sold VIA Motors Units to investors at $20 per Unit, a 91% markup over the price at which the defendants had acquired the securities. Investors in that fund lost nearly $1.2 million, while the defendants received nearly $600,000 in hidden upfront fees from these sales. The complaint also notes that TSG purchased Stripe Pre-IPO Securities at $28.40 and $27.12 per Unit in September and December 2023, respectively, while selling them to investors at significantly higher prices (Compl. ¶154-156). "...charged investors massive hidden fees... prices at which Defendants sold membership interests in the Funds ('Interests') were on average approximately 46% higher..." (Compl. ¶3).

Offering Documents Allegedly Misled Investors About Fees

The SEC alleges that the offering documents for the funds, which Spaventa drafted, reviewed, or approved, contained misleading disclosures about fees. The private placement memoranda ("PPMs") initially stated that affiliates "may" receive income from sales but did not disclose the 46% average markup. Later versions labeled these markups as "Front-Load," "Front-Load Fee," "Fund Fees," or similar terms, but the SEC claims these disclosures still understated the true magnitude of the fees, which ranged from 27% to 91% depending on the fund. The complaint alleges that the defendants "...falsely and misleadingly told prospective investors... that they would be charged either no upfront fees or upfront fees of no greater than 12.5%." (Compl. ¶4).

The SEC further alleges that the defendants collected $23 million in upfront fees from investors, while Spaventa personally enriched himself by at least $4 million. Alpha Partners, which served as the investment adviser to nine of the funds, received $750,000 from investor money. The offering documents stated that the fund manager was entitled to a 20% carried interest in investors' profits following a liquidity event.

Investor Demographics Highlight Retail Focus

The eleven funds managed by the defendants attracted a predominantly retail investor base, including a significant number of small-dollar investors. The complaint states that more than 650 investors contributed $100,000 or less, while more than 220 invested $20,000 or less (Compl. ¶47). This demographic detail underscores the SEC's focus on protecting retail investors from the alleged fraudulent scheme. The funds raised money from investors across 49 U.S. states, the District of Columbia, and more than 10 other countries, with more than 100 retirees among the investors (Compl. ¶46-47).

Boiler-Room Sales Tactics Allegedly Included False Claims of Scarcity and Extraordinary Returns

The SEC alleges that Spaventa and his entities employed more than 100 sales agents in New York and New Jersey offices to cold-call investors using aggressive boiler-room tactics. Training materials reportedly instructed agents to create a "sense of scarcity" to pressure investors into purchasing interests in the funds. The complaint states, "Sales agents falsely claimed that the supply of remaining Units was scarce or nearly exhausted..." (Compl. ¶6). An Apprenticeship Manual cited in the complaint directed agents to create this "sense of scarcity" (Compl. ¶189).

The complaint alleges that sales agents falsely represented that the funds held actual shares of the pre-IPO companies. For example, agents told investors, "We own the shares" or "We own 2,000 shares" (Compl. ¶168-173). However, the SEC claims that more than 90% of the pre-IPO securities held by the funds were acquired via other pre-IPO funds, such as StraightPath Venture Partners LLC, which the SEC previously alleged did not own the shares it sold to investors. Sales agents also allegedly made false claims about expected returns, with scripts projecting returns of 200% to 1,000% based on prior investments in companies like Airbnb, Palantir, and SpaceX, despite the defendants having no prior investments in these companies (Compl. ¶178-187).

The complaint alleges that Spaventa trained agents to mislead investors about the funds' expected returns and track record. For instance, a Kraken Sales Script projected an 184% return and falsely compared the investment to Coinbase, despite the defendants having no prior investment in Coinbase (Compl. ¶179-180). Another script claimed returns of 800-1000% were possible (Compl. ¶181). The defendants allegedly touted these extraordinary returns to investors, with one sales agent falsely claiming that the lowest sale was 75% at SoFi and another citing 300-500% returns from Airbnb, Palantir, and SpaceX (Compl. ¶186-187).

Defendants Allegedly Failed to Verify Accredited Investor Status

The offering documents stated that the funds would require investors to provide information sufficient for the Fund to verify each investor’s status as an "accredited investor," as defined by Rule 501 of Regulation D. Under this rule, an accredited investor must meet certain financial thresholds, including a net worth of at least $1 million (with spouse), excluding the value of their primary residence, or an annual income of at least $200,000 (individual) or $300,000 (joint with spouse) (Compl. ¶201). However, the SEC claims the defendants relied on purchased lists of potential investors and self-certification questionnaires, without confirming the accuracy of the information provided. The agency alleges that the defendants accepted investors who submitted non-accredited questionnaires or did not complete the accreditation questions at all. "Defendants did not confirm the accreditation status of investors on purchased lists, even after receiving non-accredited questionnaires," the complaint states (Compl. ¶204).

This failure to verify accredited investor status allegedly disqualified the funds' offerings from the private placement exemption under federal securities laws. The SEC further alleges that the defendants engaged in general solicitation through cold calls, a website, and social media, which also disqualified the offerings from the exemption under Securities Act Section 4(a)(2) or Rule 506(b) (Compl. ¶198).

Unregistered Broker-Dealer Activity Allegedly Generated $11 Million in Commissions

The SEC alleges that Spaventa and TSG violated Exchange Act Section 15(a)(1) by employing more than 100 unregistered sales agents to solicit investors for the funds. These agents earned commissions totaling $11 million, calculated as a percentage of the funds raised. The complaint quotes a handbook that states, "Never mention commissions or even use the word 'commission[,]'" and directs agents to use the term "Referral Fee" (Compl. ¶214).

The complaint highlights Spaventa's history with FINRA as evidence of his awareness of broker-dealer registration requirements. In September 2019, FINRA suspended Spaventa for failing to pay an arbitration award, though the suspension was lifted in December 2019 (Compl. ¶18). In May 2023, FINRA expelled SW Financial, a broker-dealer where Spaventa was previously associated (Compl. ¶31). In March 2024, Spaventa acquired Brightchoice Financial, LLC, a registered broker-dealer, and began operating it as TSG Capital Advisors LLC. The SEC alleges that despite this acquisition, Spaventa continued to use unregistered entities to pay unlicensed sales agents to solicit investors for the funds. The complaint states that Spaventa and TSG "used interstate commerce to effect transactions in securities" without being registered as broker-dealers (Compl. ¶252).

SEC Alleges Violations of Multiple Federal Securities Laws

The SEC's complaint includes twelve claims for relief against the defendants:

1. FIRST CLAIM FOR RELIEF: Violations of Securities Act Section 17(a) [15 U.S.C. § 77q(a)] (All Defendants).
2. SECOND CLAIM FOR RELIEF: Aiding and Abetting Liability for Violations of Securities Act Section 17(a) [15 U.S.C. § 77q(a)] (Spaventa).
3. THIRD CLAIM FOR RELIEF: Violations of Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] (All Defendants).
4. FOURTH CLAIM FOR RELIEF: Control Person Liability for Violations of Exchange Act Section 10(b) and Rule 10b-5 [15 U.S.C. § 78t(a)] (Spaventa).
5. FIFTH CLAIM FOR RELIEF: Aiding and Abetting Liability for Violations of Exchange Act Section 10(b) and Rule 10b-5 [17 C.F.R. § 240.10b-5] (Spaventa).
6. SIXTH CLAIM FOR RELIEF: Violations of Advisers Act Sections 206(1), 206(2), 206(3), 206(4) [15 U.S.C. §§ 80b-6(1)-(4)] and Rule 206(4)-8 [17 C.F.R. § 275.206(4)-8] (Spaventa, TSG, Alpha Partners).
7. SEVENTH CLAIM FOR RELIEF: Aiding and Abetting Liability for Violations of Advisers Act Section 206 and Rule 206(4)-8 (Spaventa).
8. EIGHTH CLAIM FOR RELIEF: Violations of Securities Act Sections 5(a) and 5(c) [15 U.S.C. §§ 77e(a), 77e(c)] (All Defendants). "No registration statement was filed or was in effect with the Commission for any of the securities offered or sold by the Defendants," the complaint states (Compl. ¶245).
9. NINTH CLAIM FOR RELIEF: Aiding and Abetting Violations of Securities Act Sections 5(a) and 5(c) [15 U.S.C. §§ 77e(a), 77e(c)] (Spaventa). "Spaventa is liable for aiding and abetting violations of Securities Act Section 5(a) and (c), and unless enjoined, will again aid and abet these violations," the complaint states (Compl. ¶250).
10. TENTH CLAIM FOR RELIEF: Violations of Exchange Act Section 15(a)(1) [15 U.S.C. § 78o(a)(1)] (Spaventa, TSG). "Spaventa and TSG... have violated and, unless enjoined, will again violate Exchange Act Section 15(a)(1)," the complaint states (Compl. ¶253).
11. ELEVENTH CLAIM FOR RELIEF: Control Person Liability for Violations of Exchange Act Section 15(a)(1) [15 U.S.C. § 78o(a)] under Exchange Act Section 20(a) [15 U.S.C. § 78t(a)] (Spaventa). "Spaventa is liable as a control person under Exchange Act Section 20(a) for violations of Exchange Act Section 15(a)(1) by TSG," the complaint states (Compl. ¶257).
12. TWELFTH CLAIM FOR RELIEF: Aiding and Abetting Liability for Violations of Exchange Act Section 15(a)(1) [15 U.S.C. § 78o(a)(1)] (Spaventa). "Spaventa is liable for aiding and abetting TSG’s violations of Exchange Act Section 15(a)(1)... and unless enjoined, will again aid and abet these violations," the complaint states (Compl. ¶261).

Defendants' Alleged Ties to Prior SEC Action Against StraightPath

The SEC's complaint highlights Spaventa's alleged involvement with StraightPath Venture Partners LLC, which was the subject of a prior SEC enforcement action filed on May 13, 2022 (SEC v. StraightPath Venture Partners LLC, et al., 22 Civ. 3897). The SEC previously alleged that StraightPath raised at least $410 million from more than 2,200 investors through the sale of interests in private funds that purportedly held pre-IPO securities. The complaint in that case alleged that StraightPath did not own the shares it sold and that the principals, including Michael Castillero, misled investors about the value and liquidity of the investments.

Spaventa was associated with SW Financial, a broker-dealer, from late 2018 until its expulsion by FINRA in May 2023. During this period, Spaventa allegedly raised money for StraightPath funds and used approximately $4.5 million from investors to invest in StraightPath's funds (Compl. ¶31, 33). The complaint alleges that Spaventa modeled the offering documents for his own funds on those used by StraightPath, including the fee descriptions (Compl. ¶88).

In November 2023, the principals of StraightPath, including Castillero, were indicted in a parallel criminal case (United States v. Michael Castillero, et al., 23 Cr. 622). They were convicted at trial in November 2025 and sentenced to 8-11 years imprisonment in May 2026.

Fundraising and Fee Structure Details

The eleven funds managed by the defendants raised a total of $74 million from investors across 49 U.S. states, the District of Columbia, and more than 10 other countries. The funds targeted primarily retail investors, including more than 100 retirees. More than 650 investors contributed $100,000 or less, and more than 220 invested $20,000 or less (Compl. ¶46-48).

The complaint provides a breakdown of the amounts raised by each fund:

• Fund 1: $3,870,018
• Fund 2: $22,802,813
• Fund 3: $11,847,239
• Fund 4: $7,142,458
• Fund 5: $5,126,619
• Fund 6 (Anduril): $4,730,656
• Fund 7 (Anthropic): $4,848,207
• Fund 8 (Relativity Space): $5,796,568
• Additional Fund 9 (Relativity Space): $2,657,292
• Fund 10 (Perplexity AI): $2,504,720
• Fund 11 (Perplexity AI): $2,718,350

The defendants allegedly charged markups on the pre-IPO securities ranging from 27% to 91%, depending on the fund. For example, Fund 4 (Stripe) acquired pre-IPO securities at prices ranging from $26.51 to $28.40 per Unit and sold them to investors at $35.50 to $37 per Unit, resulting in markups of 40% to 63% (Compl. ¶154-156). In September and December 2023, TSG purchased additional Stripe Pre-IPO Securities at $28.40 and $27.12 per Unit, respectively, while continuing to sell them to investors at higher prices (Compl. ¶156). Fund 7 (Anduril) acquired pre-IPO securities at prices ranging from $39.77 to $41.62 per Unit and sold them to investors at markups of 40% to 54%. Fund 8 (Anthropic) acquired securities at $20.47 to $25.31 per Unit and sold them to investors at $26.90 to $32.62, resulting in markups of 29% to 38%. Fund 9 (Relativity Space) acquired pre-IPO securities at $22.83 per Unit and sold them to investors at $58.50, a 43% markup, in addition to other acquisitions at $32.62 to $41.53 per Unit with markups ranging from 41% to 79% (Compl. ¶154-161).

The complaint alleges that the defendants misrepresented the value of the pre-IPO securities to investors. For instance, an Anduril Investment Memorandum claimed that TSG had secured shares at a discount for investors, but the return projections were based on TSG's lower acquisition price, not the higher price paid by investors (Compl. ¶150-151).

Defendants' Alleged Use of Investor Funds

The SEC alleges that the defendants used investor funds to pay substantial commissions to sales agents and to enrich Spaventa personally. The complaint states that the defendants paid $12 million to sales agents and that Spaventa enriched himself by at least $4 million (Compl. ¶48). Alpha Partners, which served as the investment adviser to nine of the funds, received $750,000 from investor money.

The complaint also alleges that the defendants used investor funds to acquire pre-IPO securities from other funds, rather than purchasing them directly from shareholders. For example, a TSG Whitepaper falsely claimed that shares were purchased directly from shareholders, when in fact the majority of pre-IPO securities were acquired via other funds, such as StraightPath (Compl. ¶162-164). The SEC previously alleged that StraightPath did not own the shares it purported to hold (Compl. ¶166). Investors were required to pay fees to both TSG and the other entities involved, which further reduced their potential returns (Compl. ¶167).

SEC Seeks Permanent Injunctions, Disgorgement, and Civil Penalties

The SEC's complaint seeks permanent injunctions against each defendant, prohibiting them from violating the federal securities laws. The complaint also seeks disgorgement of all ill-gotten gains, plus prejudgment interest, as well as civil penalties against each defendant. Additionally, the SEC seeks an order prohibiting Spaventa from acting as an officer or director of any issuer of securities. The complaint states, "...permanently enjoining Defendants from violating the federal securities laws and..." (Compl. ¶11).

The allegations remain unproven, and no defendant has yet responded to the complaint. The case is being closely watched by industry observers due to its potential implications for the regulation of pre-IPO investment funds and the marketing of private securities offerings.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.