A federal judge in Manhattan sentenced three operators of Legend Venture Partners to prison on Wednesday, closing out a criminal case built on a $185 million pre-IPO investment fraud that prosecutors say ensnared more than 1,400 retail investors through secret markups as high as 105 percent on pre-IPO shares.
U.S. District Judge Vernon S. Broderick sentenced Legend co-founder Mario Gogliormella to 52 months in prison, while co-defendants Steven Lacaj and Karim Ibrahim, who also went by the name Chris Hayes, each received 42-month sentences, according to the U.S. Attorney's Office for the Southern District of New York. The sentencing followed guilty pleas the three men entered earlier this year, avoiding a trial that could have exposed them to steeper penalties. In a statement announcing the sentences, the office was also the source for the seed post quoting U.S. Attorney Jamie McDonald, distributed via US Attorney SDNY
on X, in which McDonald said, “This Office will continue to prioritize enforcement against fraud in the pre-IPO space,” adding that “our markets — both public and private — can flourish only if their integrity is preserved.”
Prosecutors say the fraud was staggering in scale. Legend raised roughly $185 million from more than 1,400 retail investors while charging secret markups on pre-IPO shares ranging from 19 percent to 105 percent and averaging almost 60 percent, pocketing an estimated $46 million in hidden markups, per the U.S. Attorney's Office. Investors were pitched direct access to shares in hot pre-IPO companies without ever being told the share prices had been arbitrarily inflated before the sale.
Inside the Manhattan Call Centers
The scheme relied on a Manhattan call center operation where sales representatives used a script known internally as “The Bible” to cold-call retail investors with high-pressure pitches, the U.S. Attorney's Office said in a January announcement. Reps allegedly told investors they only made money if the investors profited, even though they were actually collecting upfront commissions of 10 to 15 percent on incoming capital. Of the $185 million raised, at least $17.5 million was funneled directly to those sales reps as undisclosed fees, while an additional $28 million went straight to the firm's three principals, despite marketing materials promising investors that no upfront management or sales fees applied.
Federal prosecutors and the SEC also found that Legend's operators hid their own past regulatory disciplinary histories from prospective clients, according to the same U.S. Attorney's Office release.
A Familiar Playbook From a Predecessor Firm
Legend Venture Partners wasn't a first offense for the people behind it. The firm was formed in February 2022, just after its predecessor, StraightPath Venture Partners, shut down under an SEC investigation, according to The Broadsheet. Legend's operators were associates of StraightPath's principals, and the firm operated two blocks away at 90 Broad Street as StraightPath faced an emergency SEC shutdown and asset freeze in May 2022, the outlet reported.
StraightPath's own principals — Michael Castillero, Francine Lanaia, and Brian Martinsen — chose to fight their case at trial rather than plead guilty, and it cost them. They were convicted after a trial the previous fall and received sentences of 11, 8, and 10 years respectively, along with $115 million in restitution orders, per the U.S. Attorney's Office. Castillero and Martinsen were also convicted of obstruction of justice for destroying investigative records, the office said.
Gogliormella, Lacaj, and Ibrahim took a different path, pleading guilty in January to conspiracy and fraud, according to the U.S. Attorney's Office.
Recovering Investor Losses Through Receivership
While the criminal case has run its course, a parallel civil effort continues trying to recover money for victims. Legend was placed under receivership, and a receiver has recovered funds for investors, according to The Broadsheet.
This isn't the first pre-IPO fraud case Hoodline has tracked out of New York federal courts. In December, Hoodline reported on guilty pleas in a $65 million scheme. Together with the Legend and StraightPath prosecutions, the cases point to a pattern regulators are still working to contain: operators shutting down one firm under scrutiny only to relaunch blocks away under a new name.
