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From Securities Regulation Daily, March 20, 2014

Pre-IPO investment fund manager agrees to pay $500,000 for role in fraud

By Amanda Maine, J.D.

A fund manager agreed to pay $500,000 and to be barred from the securities industry for his role in a scheme to defraud investors by misrepresenting that his funds invested in pre-IPO shares of technology companies (SEC v. Mazzola, March 20, 2014, Chesney, M.).

SEC complaint. The SEC alleged that Frank Mazzola and Felix Investments (Felix), a registered broker-dealer owned by Mazzola, engaged in a series of misrepresentations regarding funds associated with Felix (the FLA Funds). According to the SEC, Mazzola, and Felix solicited investors for the FLA Funds, which were designed to invest in securities of popular technology companies that had yet to go public. They failed to inform investors that Facebook had blocked the transfer of its shares to the FLA Funds. They also misrepresented the financial condition of Twitter and falsely led investors to believe that a fund created to invest in the stock of Zynga Inc. owned Zynga stock when it did not, the SEC alleged. Mazzola and Felix were paid secret commissions in connection with this conduct.

Settlement. The SEC announced that it had settled the matter with Mazzola and Felix Investments. Mazzola and Felix agreed to pay $500,000 and Mazzola agreed to be barred from the securities industry for three years. Mazzola also agreed to resign and disassociate with Felix by August 31, 2014, and in the meantime, engage an independent, third-party consultant with compliance expertise to review his activities at Felix and report to the SEC on his conduct and eventual departure from the firm. Mazzola did not admit or deny the SEC’s allegations.

The case is No. 12-cv-1258.

Attorneys: Erin E. Schneider for the SEC. Jahan Pierre Raissi (Shartsis Friese LLP) for Frank Mazzola, Felix Investments, LLC, and Facie Libre Management Associates, LLC.

Companies: Felix Investments, LLC; Facie Libre Management Associates, LLC

MainStory: TopStory Enforcement FraudManipulation BrokerDealers InvestmentAdvisers CaliforniaNews

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