Remember when everyone wanted Facebook stock? When getting pre-IPO shares was a point of pride, when retail investors worried they weren’t big enough fish to rate allotments from their brokerages? That friends, was an opportunity, and there are some men who answer when opportunity knocks.
John Mattera, for instance, the Floridian charged last year with scheming to bilk investors for $12.6 million by promising them the chance to own pre-IPO shares of companies inlcuding Facebook and Groupon, was such a man. At the time of his ill deeds, Mr. Mattera was the chairman of the advisory board of something called Praetorian Global Fund, which offered investors the chance to buy into something called the “G Power Entities,” supposed special purpose vehicles which purported to own stock in the pre-IPO firms.
But the G Power entities didn’t know own the shares, according to a statement from U.S. Attorney Preet Bharara today, and Mr. Mattera didn’t safeguard investors’ money. Instead, he “caused the vast majority of the funds to be transferred to other entities with which he was associated.” That is, he made off with “approximately $13 million,” spending nearly $4 million on luxury items for himself and family members.
Well, Mr. Mattera will face up to 20 years on each of two fraud charges, and 5 years on one count of conspiracy, when he appears for sentencing next year.
But we wonder whether the judge will consider this (from the indictment): “At least one version of the G IV agreement entitled its investors to Facebook shares held by G IV at $39 per share. Similarly, at least one version of the G V agreement entitled its investors to Groupon shares held by G V at $25 per share.”
Those prices, you may notice, are well beyond where the respective companies currently trade. Groupon closed today at $4.65, Facebook at $22.27. If Mr. Mattera can raise the cash to pay restitution, his investors may be better off than if they had acquired ownership of pre-IPO shares.
That sounds like an opportunity to plead for leniency.