Founder and Executive of Prior2IPO Indicted in Investment Fraud

A three-count indictment was unsealed this morning in federal court in Brooklyn charging Raymond John Pirrello, Jr., also known as “Ray John,” with securities fraud conspiracy, wire fraud conspiracy and securities fraud relating to a scheme to defraud investors and prospective investors in securities offered by Late Stage Management, LLC through several sales offices, including Prior2IPO which he controlled.  Pirrello allegedly made material misrepresentations and omissions relating to, among other things, the existence and amount of fees paid by investors in stock offered by Late Stage.  Late Stage offered investors “no fee” opportunities to invest in “Pre IPO” stocks, i.e., shares of stock in companies that anticipated an initial public offering (“IPO”) in the near term.  Pirrello was arrested this morning and will be arraigned this afternoon before United States Magistrate Judge James M. Cho. 

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

“As alleged, the defendant lied to investors by claiming that the investments made through Late Stage carried no fees and that their full investment would be used to purchase stock, when in reality he was paying himself significant fees on each investment,” stated United States Attorney Peace.  “This Office will vigorously prosecute those who think it is business as usual to abuse the trust of their clients and profit through fraud.” 

Mr. Peace expressed his appreciation to the Securities and Exchange Commission, New York Regional Office, for their significant cooperation and assistance during the investigation. 

"Lying and making material misrepresentations to investors is not just dishonest and bad business, but also a crime. Raymond Pirrello is alleged to have done just that when he advertised no-fee opportunities. In reality there were significant up-front fees from which he personally benefited.  The FBI is committed to holding accountable those who seek to profit from lies,” stated FBI Assistant Director-in-Charge Smith.

As set forth in the indictment and other court documents, Late Stage was a New Jersey based manager of investment funds that bought and sold stock issued by privately held companies that anticipated an IPO.  Late Stage worked with several sales offices throughout New Jersey, New York and Florida in order to promote the investments.  The salespeople used pitches devised by Pirrello and his co-conspirators which consistently touted that the investments carried no upfront fee, and claimed that the only time Late Stage profited was on exit, when the company made its IPO or sold to a larger company, in which case it would be entitled to a 20% share of the investor’s profits.  In reality, Late Stage charged substantial fees in the form of markups of stock ranging from 10 to 50% of the stock’s actual per share price.  In total, between approximately March 2019 and July 2022, sales offices working on behalf of Late Stage raised approximately $528 million from investors and diverted approximately $88.6 million in undisclosed upfront markups to Pirrello and his co-conspirators.   

The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, Pirrello faces a maximum sentence of 20 years’ imprisonment.

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 fraud that Pirrello allegedly committed.

The government’s case is being handled by the Office’s Business & Securities Fraud Section.  Assistant United States Attorneys Lauren Howard Elbert and Jessica Weigel are in charge of the prosecution. 

If you believe that you or someone you know was victimized by Pirrello, please inform the FBI at the following website: www.fbi.gov/Pirrello or by calling 1-800-CALL-FBI. 

The Defendants:

RAYMOND JOHN PIRRELLO, JR.
Age:  47
Sparta, New Jersey

E.D.N.Y. Docket No. 23-CR-499