Inside the SEC’s $74 Million Pre-IPO Fund Case

The Facts

The pitch offered ordinary investors a route into a market normally associated with venture capitalists and company insiders: shares in private businesses such as SpaceX, Stripe, Anthropic, Anduril and Perplexity AI before a possible initial public offering.

A pre-IPO investment is an economic stake in a company that has not yet listed its shares on a public stock exchange. It can become valuable if the company later goes public or undergoes another transaction that allows investors to exchange the stake for shares or cash. It can also remain illiquid for years, lose value or turn out to be held through layers of other investment vehicles.

The SEC says Spaventa’s operation sold membership interests in eleven limited-liability-company funds. Investors were told those interests corresponded to a specified number of “Units” tied to private-company securities. From approximately December 2020 through at least June 2025, the complaint alleges, the defendants sold those interests to more than 800 investors in 49 states, the District of Columbia and at least ten other countries.

The investor base was not limited to institutions. The complaint identifies more than 100 retirees. More than 650 individual investors put in a total of $100,000 or less, while more than 220 invested $20,000 or less.

The named defendants are Spaventa; The Spaventa Group LLC, known as TSG; TSG Capital Advisors LLC; and TSG Alpha Partners LLC. Spaventa founded and solely owned TSG, indirectly held a majority stake in the other two businesses and, according to the SEC, controlled the selection, acquisition and pricing of the funds’ investments.

The Price Investors Saw Was Not the Price TSG Paid

The complaint describes a structure that placed Spaventa on both sides of important transactions. TSG or another company he wholly owned, TSG Invest Ventures, acquired pre-IPO securities. Those entities then sold the investments to funds that Spaventa also controlled or advised.

1. An affiliated company acquired the investment. TSG or TSG Invest bought private-company exposure, usually by investing in another pre-IPO fund.
2. The affiliate transferred it to a TSG fund at a higher price. The SEC says Spaventa selected the securities, determined the acquisition and resale prices, and set the Unit price paid by investors.
3. The higher cost reached the investor. The complaint characterizes the difference as an upfront fee embedded in the Unit price rather than clearly presented as a separate charge.

This arrangement matters because it is what securities law calls a principal transaction: an investment adviser sells an investment from its own account or inventory to a client. The adviser has an obvious conflict—it can benefit by setting a higher price. The SEC says federal law therefore required advance written disclosure and client consent.

According to the complaint, Spaventa did not obtain written consent from the funds before the sales. The funds had no boards to evaluate the transactions, and Spaventa allegedly established neither an investor advisory committee nor an independent third party to determine whether the purchases served the funds’ interests.

Across the eleven funds, the SEC calculates that investor prices were approximately 27% to 91% higher than the prices TSG or TSG Invest paid for the underlying pre-IPO securities.

The complaint’s fund-by-fund table makes the alleged spread concrete:

Stripe provides a useful test of the SEC’s pricing theory. TSG began buying Stripe securities on April 24, 2023, and began offering Fund 4 Units days later, on May 1. Investors paid $35.50 to $37 per Unit, while TSG’s alleged acquisition prices ranged from $22.67 to $26.51. TSG then bought an additional tranche for $26.51 in June—after sales to investors at the higher price had begun.

The SEC says publicly available secondary-market data placed Stripe securities around TSG’s acquisition price, not the investor price. Similar comparisons are alleged for Anduril and Perplexity AI.

The “No Hidden Fees” Pitch

The SEC alleges that the markups were not merely difficult to find. It says prospective investors were affirmatively told that the funds charged either no upfront fees or fees no higher than 12.5%.

Private placement memoranda—documents intended to explain a private offering’s terms and risks—stated that affiliates “may” receive income when securities were sold to the funds at higher prices. The SEC says that wording was misleading because markups were a standard and essential part of the business model. For every fund except the first, the complaint alleges, the affiliate had already generated that income before investor interests were sold.

The documents varied by fund. Materials for Funds 1 and 2 allegedly stated that there were no fees other than a 20% share of investor profits, known as carried interest. Confirmation letters generally listed zero dollars for multiple upfront fee categories. Yet the SEC calculates that investors in those funds paid prices 35% to 91% above TSG’s acquisition costs.

Materials for Funds 3 through 9 disclosed a 7.5% or 12.5% upfront charge but allegedly did not reveal the full price spread. Investors in those funds paid prices the SEC says were 29% to 79% above TSG’s costs. Funds 10 and 11 returned to language stating that there were no fees other than carried interest, while referring separately to adviser or placement-agent compensation without specifying the total alleged markup.

The SEC says the second claim was economically false because TSG received its markup when an investor bought in, regardless of whether the underlying company later went public or the investor recovered anything.

The complaint alleges that approximately $23 million was collected through the upfront price spreads. At least $4 million allegedly went to Spaventa, including payments for a home purchase, renovations, personal travel and luxury cars. More than $12 million was used to pay sales commissions, according to the SEC.

A Sales Floor Built Around Urgency, Returns and Scarcity

The complaint describes offices in New York and New Jersey that operated as boiler rooms—a term for call centers using aggressive, scripted sales tactics. More than 100 agents allegedly cold-called thousands of prospective investors from purchased lead lists.

Spaventa drafted or approved an apprenticeship manual, employee handbook and offering-specific scripts, the SEC says. The manual emphasized urgency. The handbook instructed agents to suggest that an investment “needs to be done ASAP before the price increase or we run out of supply.” Recorded calls were allegedly used in roleplaying exercises to improve sales pitches.

Scarcity without regard to inventory

Agents were trained to create the impression that only a small number of Units remained, according to the complaint. One Kraken script instructed the caller to say 2,000 Units were “all we have left.” In a February 2022 recorded call, an agent allegedly said the firm was down to its last few Units when TSG still held more than 5,000 Kraken Units.

Return projections without a reasonable basis

The SEC says agents projected gains of 200% to 1,000% and linked them to a supposed history of successful pre-IPO investments. The complaint alleges that TSG’s white paper claimed investments in Airbnb, Palantir and SoFi even though none of the eleven funds had invested in those companies.

A Kraken script circulated in October 2021 allegedly projected that Units would rise from $88 to $250 after an initial public offering. A later version directed agents to suggest returns of 800% to 1,000%. The scripts invoked Coinbase and claimed TSG clients had entered at $40 before its public trading price surged, even though no TSG fund had invested in Coinbase pre-IPO securities, according to the SEC.

For Anduril, the complaint quotes a sales script stating that the firm had returned between 200% and 1,000% to clients. Recorded calls allegedly repeated those figures and predicted a 500% return. The SEC says those projections lacked a reasonable basis.

The Funds Usually Did Not Hold Shares Directly

The way the investments were held added another layer to the case. Sales material allegedly said TSG purchased shares from existing company shareholders. Agents told prospective investors that the funds owned shares in their inventory and, in one recorded Anduril pitch, that buying through TSG meant “you own the shares.”

The SEC alleges something materially different: TSG and TSG Invest obtained more than 90% of the pre-IPO securities held by the funds by investing in other pre-IPO funds. In practical terms, the TSG fund often held an interest in another vehicle that purported to hold the private-company shares.

That structure can add both fees and ownership risk. Each layer may charge compensation, reducing what ultimately reaches investors. It also means the TSG fund’s claim depends on the intermediary actually owning the securities it says it owns.

The first two TSG funds invested through vehicles managed by StraightPath Venture Partners. The SEC’s complaint notes that StraightPath was separately accused of selling interests tied to more pre-IPO shares than it owned. According to the complaint, StraightPath’s principals were convicted in a parallel criminal case in November 2025 and sentenced in May 2026 to prison terms ranging from eight to eleven years.

The SEC does not allege in this complaint that every security attributed to the TSG funds was missing. It alleges that the layered structure increased the risk that the funds did not own all of the relevant securities and that investors were misled about what had been purchased.

The SEC’s Registration Case

The complaint brings legal theories beyond allegedly misleading statements and fees. It says the securities offerings and much of the sales operation lacked required registration.

The private-offering exemption

A company selling securities generally must register the offering with the SEC unless an exemption applies. The defendants purported to rely on two private-offering safe harbors under Regulation D.

One, Rule 506(b), can cover sales to accredited investors and a limited number of other qualified buyers, but it does not permit general solicitation. The SEC says cold calls to purchased lead lists, website promotion and social-media advertising amounted to general solicitation, making that route unavailable.

The second, Rule 506(c), permits broader solicitation but requires every buyer to be an accredited investor and requires reasonable verification. Under the standards quoted in the complaint, an individual could qualify through net worth exceeding $1 million, annual income over $200,000 or joint income over $300,000.

The SEC alleges that the defendants relied on self-certification and purchased investor lists rather than reviewing tax records, brokerage statements, bank records or other verification. Some investors were allegedly accepted even when their questionnaires were incomplete or did not claim accredited status.

The unregistered sales force

A broker-dealer is a person or company in the business of effecting securities transactions. Registration brings supervision, licensing and conduct requirements. The complaint alleges that TSG functioned as an unregistered broker-dealer by hiring, training and supervising agents who solicited investments and received transaction-based commissions.

Many of the agents allegedly had no private-fund background. The vast majority were not associated with a registered broker-dealer during the relevant period, and several had previously been suspended or barred by the Financial Industry Regulatory Authority, the industry’s self-regulatory organization.

Typical commissions were 10% of the money an agent raised in a month. The SEC calculates that Spaventa and TSG paid approximately $11 million in commissions to unregistered agents. The handbook allegedly told agents never to use the word “commission” and to call the payment a “Referral Fee.”

Spaventa acquired a registered broker-dealer in 2024 and began using Capital Advisors as a placement agent later that year. The SEC nevertheless alleges that TSG and other entities continued paying agents who were not licensed or associated with a registered broker-dealer.

The Investor Consequences

The SEC says the vast majority of fund investors had not recouped their investments when the complaint was filed, and that some had suffered total or near-total losses. The filing does not provide a complete fund-by-fund accounting of current assets, investor recoveries or remaining value.

It does provide one specific example. Investors who bought Fund 2 interests tied to VIA Motors allegedly lost nearly $1.2 million, while TSG received nearly $600,000 through the upfront price spread. TSG continued selling the Units for $20 through September 17, 2021, the complaint says, after a proposed acquisition of VIA Motors had been publicly announced on terms that would significantly dilute existing shareholders.

The economic consequence of an embedded markup begins before the underlying company succeeds or fails. An investor who pays $20 for exposure acquired at $10.50 needs the asset to rise substantially just to overcome the price difference. Additional intermediary fees and the manager’s 20% share of profits can move the break-even point higher.

That is why fee disclosure is not an administrative detail. It changes the return investors must earn before they recover their capital.

What the SEC Is Asking the Court to Do

The complaint asserts twelve claims under federal securities, investment-adviser and broker-dealer laws. Broadly, the SEC alleges fraud in the offer and sale of securities, breaches of investment-adviser duties, unregistered securities offerings and operation of an unregistered broker-dealer.

The regulator asks the court to permanently prohibit the defendants from future violations. It also seeks orders barring Spaventa from working as or associating with a broker, dealer or investment adviser, and from participating in securities offerings except through transactions in his own personal account.

The requested financial remedies include civil penalties and disgorgement, meaning the return of gains the SEC contends were obtained through violations, plus interest. The complaint asks that the defendants be held jointly and severally responsible for disgorgement, which would allow the court to make multiple defendants responsible for the same recoverable amount.

Those are requests, not imposed penalties. No final judgment appears in the supplied source, and the amount—if any—that could ultimately be recovered has not been determined.

What a Legitimate Fix Looks Like

The complaint describes alleged failures in pricing, conflict management, sales supervision, ownership verification and investor qualification. A credible response would have to address each mechanism rather than replacing one disclosure paragraph with another.

Show the complete price stack

Investors should receive the affiliate’s acquisition price, every intermediary fee, the fund’s purchase price, the investor’s final Unit price and the manager’s profit participation in one standardized disclosure. Calling the final price “market value” is not a substitute for showing how it was calculated.

Put conflicted trades through independent review

When an adviser sells its own inventory to a client fund, advance written consent should be paired with review by genuinely independent representatives capable of rejecting the transaction. The review should compare the price against available secondary-market evidence and document why the purchase serves the fund.

Trace ownership to the underlying asset

Funds should identify whether they own company shares directly or merely hold an interest in another vehicle. The ownership chain, transfer restrictions, intermediary fees and any shortfall in the underlying shares should be independently verified before interests are sold.

Use registered, supervised sellers

Anyone paid based on securities sales should have the required registration and supervision. Scripts, recorded calls and written communications should be reviewed for unsupported return projections, manufactured scarcity and inaccurate descriptions of fees or holdings.

Verify investor eligibility

If an offering relies on an exemption requiring accredited investors, verification must be more than a checked box. The issuer should retain evidence of the reasonable steps taken while protecting sensitive financial information.

What to Watch

The Question the Complaint Leaves Open

The SEC’s account is unusually specific about the alleged machinery: acquisition prices, investor prices, scripts, recorded calls, compensation and the movement of money among related entities. Its central claim is that the operation earned substantial revenue at the moment investors bought in while telling them that compensation depended largely on their eventual success.

What remains unresolved is equally concrete. The court has not determined whether the statements were fraudulent, whether the defendants violated registration or adviser laws, how the defendants will respond, what assets each fund actually owns, or how much investors could recover.

The decisive documents will be those that connect each investor’s payment to the relevant security, intermediary, affiliate markup and remaining asset. Until that accounting is established—and the legal claims are tested—the complaint provides a detailed allegation of the pricing system, not a final adjudication of it.