As reported recently in the Wall Street Journal�and other news sources,�federal prosecutors and the Securities and Exchange Commission (SEC) arrested Florida-based financier John Mattera on Nov. 17 and charged him with securities fraud, conspiracy, wire fraud and money laundering.
Essentially, Mattera ran an operation that claimed that he could provide pre-IPO shares in hot companies like Facebook, Groupon (NASDAQ:GRPN), Twitter and Zynga. In all, the scheme netted $12.6 million.
According to the federal complaint, there never were shares of private stock to sell. Instead, the authorities allege, Mattera and his associates spent millions of dollars of investor money on cars and a boat. He was mindful, however, to at least make payments to the IRS!
Unfortunately, it seems unlikely that investors will get anything.
As the IPO market heats up, it�s inevitable that we will see more scams of this sort pop up. Yet the fact remains that it is incredibly difficult to get shares of hot deals, and even large investors have a difficult time getting allocations.
So if you get an offer, be wary. For starters, you should check out the company�s prospectus on the SEC�s EDGAR website (www.sec.gov) and look at the first page. You�ll see the underwriters on the deal. And if the firm that is offering you shares is not in the listing, then it�s probably a scam.
Tom Taulli runs the InvestorPlace blog �IPO Playbook,� a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
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