Senior Fund Executives and Salespeople Charged in Connection with $60 Million Pre-IPO Fraud Scheme

 

Defendants Lied to Investors Regarding Hidden Markups and Fees and Stole Millions of Dollars in Customer Funds for Themselves

At the federal court in Brooklyn, a five-count indictment was unsealed charging John Cangialosi, Peter Girgis, Gene Sarabella, also known as “Jerry,” Enrico Carini, also known as “Ed,” and Caner Otar, also known as “John,” with conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, investment adviser fraud, and money laundering conspiracy in connection with their scheme to defraud investors in Max Infinity Management LLC, Elder Fund Management LLC, and a related series of funds (collectively, “Max Infinity”).  The defendants’ fraudulent misrepresentations about the operation of the funds, including excessive and undisclosed share price markups charged to investors, allowed them to raise more than approximately $60 million from investors and divert approximately $27 million for the benefit of the defendants and other Max Infinity salespeople. 

Breon Peace, United States Attorney for the Eastern District of New York, and Christie M. Curtis, Acting Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI) announced the charges.

“As alleged, based on false promises the defendants bilked investors out of millions of dollars,” stated United States Attorney Breon Peace.  “They lied about how they made money and promised near-certain returns on investment when, in truth, they charged astonishing markups, at times greater than 95%, and defrauded investors.  My office will vigorously prosecute those who seek to take advantage of the investing public for their own greed.”

Mr. Peace expressed his appreciation to the Securities and Exchange Commission (SEC), Washington, D.C. Home Office, for its significant cooperation and assistance during the investigation. 

“These five defendants allegedly charged undisclosed markup fees to defraud almost $60 million from investors of Max Infinity, routing nearly half of the proceeds to their personal wallets. Luring in investors based on false success stories and concealing additional expenses betrays their belief that the money is being handled appropriately. The FBI will continue to disrupt fraudulent schemes rooted in deceit and investigate anyone seeking to make an unlawful quick buck at the cost of another,” stated FBI Director Curtis.

As set forth in the indictment, Max Infinity was a New York City based manager of investment funds that bought and sold stock issued by privately held companies that anticipated an initial public offering (IPO).  Principals Cangialosi, Girgis, and Sarabella, along with sales team leaders Carini and Otar, engaged in a scheme to defraud investors and prospective investors in Max Infinity by misrepresenting, among other things, that Max Infinity took no upfront fees, was registered with the SEC, and sourced pre-IPO shares directly from the issuing companies.  The defendants also fabricated Max Infinity’s track record – claiming on their website and to investors that Max Infinity had returned significant profits to investors in prior successful IPOs—when in reality, Max Infinity had no such previous investments.   Additionally, Cangialosi and Girgis were both, at various times, under suspension by the Financial Industry National Regulatory Authority (FINRA) and hid their involvement in Max Infinity from investors. 

Even though investors were told that Max Infinity did not make money until customers made money, Cangialosi, Girgis, and Sarabella paid themselves distributions and paid salespeople commissions out of excessive, undisclosed markups charged to investors.  From these distributions, Sarabella directed the purchase of more than a million dollars in luxury watches.  Salespeople also utilized scripts that falsely assured investors that the firm had an impressive track record of success in prior IPO deals, conducted extensive due diligence, and had specialized access to top deals.  At the principals’ direction, salespeople lulled investors into a false sense of security by falsely claiming SEC oversight over their fund and its investments. 

The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.  

In July 2022, Mr. Peace was selected as the Chairperson of the White Collar Fraud subcommittee for the Attorney General’s Advisory Committee (AGAC).  As the leader of the subcommittee, Mr. Peace plays a key role in making recommendations to the AGAC to facilitate the prevention, investigation and prosecution of various financially motivated, non-violent crimes including wire fraud, such as the crimes that defendants allegedly committed.

If you believe that you or someone you know was victimized by the defendants, please contact the FBI by email at: maxinfinitytips@fbi.gov or by calling 1-800-CALL-FBI.