SEC Charges Spaventa and TSG Entities Over $74 Million Pre-IPO Markup Scheme: What Investors Should Learn

The SEC charged Andrew Spaventa and three companies he controlled, The Spaventa Group LLC, TSG Capital Advisors LLC, and TSG Alpha Partners LLC, with fraud on August 14, 2026, alleging a scheme that raised more than $74 million from over 800 mostly retail investors between December 2020 and June 2025. According to the SEC's litigation release, the funds bought pre-IPO shares from Spaventa's entities at markups averaging 46% above what those entities paid, generating roughly $23 million in fees that were never disclosed to investors. The allegations are unproven in court, but the mechanics described in the complaint are worth understanding no matter how this case ends, because the same structure shows up anywhere pre-IPO access is sold to retail money.

What the SEC alleges happened

The complaint, filed in the U.S. District Court for the Southern District of New York under case number 26-civ-06958, names Andrew Spaventa personally along with The Spaventa Group LLC, TSG Capital Advisors LLC, and TSG Alpha Partners LLC. The SEC laid out the case in a press release announcing the charges, and the underlying allegations are spelled out in detail in the SEC's 46-page complaint. Spaventa, 40, is a former registered broker who founded The Spaventa Group in September 2020 after years selling pre-IPO investments at other firms. He held Series 7, 24, and 65 licenses and had already been suspended once by FINRA in 2019 for failing to pay an arbitration award tied to a customer complaint.

Per the SEC, Spaventa and his firms raised more than $74 million from over 800 investors, the large majority of them retail, for 11 private funds sold as vehicles to buy pre-IPO shares in some of the most talked-about private companies in the market. Court filings and news coverage name Anthropic, SpaceX, Anduril, Perplexity, Stripe, Rubrik, Epic Games, and Impossible Foods among the more than 13 pre-IPO companies referenced in the complaint. More than 650 investors put in $100,000 or less, and over 100 were retirees, according to Fortune's coverage of the SEC complaint.

The alleged mechanism is straightforward once you strip out the marketing language. Spaventa, through The Spaventa Group and another entity called TSG Invest Ventures, purchased pre-IPO shares directly from existing shareholders or through other private funds. He then resold those same shares to his own investment funds in what the SEC calls principal transactions, meaning Spaventa was on both sides of the trade: the seller and the person controlling the buyer. The complaint alleges these resales happened at prices averaging 46% above what Spaventa's entities had originally paid, with individual markups ranging from 27% to as high as 91% depending on the fund and the underlying company. For one specific example cited in the complaint, Fund 8 held Anthropic shares that TSG acquired at $32.62 to $41.53 per share and sold to the fund at $58.50, a markup of 41% to 79% that raised $5.8 million in 2024 alone.

Investors were told, per the SEC, that they would pay no upfront fees at all, or at most 12.5%. The actual embedded cost, baked silently into the share price they paid, averaged 46%. That gap is the entire fraud. The SEC alleges the defendants collected approximately $23 million in these undisclosed fees, of which more than $12 million was paid out as commissions to a sales force of over 100 agents, and roughly $4 million went directly to Spaventa, who allegedly used it for a home purchase, home renovations, personal travel, and luxury car payments.

The complaint also describes how the money was raised. More than 100 sales agents made cold calls to thousands of prospective investors using scripted, high-pressure pitches, a pattern the SEC's own language labels a "boiler room" operation, a description picked up in coverage from the New York Law Journal. Sheldon L. Pollock, associate director of the SEC's New York regional office, said unsolicited calls and high-pressure sales tactics are the calling cards of boiler room operators, who get investors on the phone and then hit them with the hidden fees. The SEC further alleges most of these sales agents were not registered with FINRA, and several had prior FINRA suspensions or bars. An internal sales handbook allegedly instructed agents never to use the word "commission" when describing their roughly 10% cut, and to substitute the phrase "referral fee" instead.

Beyond the markup scheme itself, the complaint alleges structural failures that made the fraud possible. Spaventa controlled both the entity selling the shares and the entities managing the funds buying them, which under securities law requires written client consent for principal transactions of this kind. The SEC alleges that consent was never properly obtained. The funds also had no independent board of directors and no third party evaluating whether the fund was getting an arm's-length price. The SEC additionally alleges that Spaventa backdated some fund equity transfer agreements after SEC staff opened an inquiry in 2023, and that more than 90% of the funds' actual holdings were stakes in other private pre-IPO funds rather than direct share ownership, adding an undisclosed second layer of fees and risk on top of the first, a detail also flagged in Crowdfund Insider's writeup of the filing. Spaventa has denied the allegations and stated he intends to defend himself in court, according to the Fortune report cited above.

How the pre-IPO markup mechanic works as a fraud vector

Here is my read on why this structure keeps showing up in enforcement cases, not just this one. Pre-IPO shares in a hot private company, an AI lab, a defense-tech startup, a payments company, are hard to get. Employees and early investors sometimes want liquidity before an IPO happens, so they sell through secondary transactions or special purpose vehicles, often called SPVs, that pool buyer money to acquire a block of shares. That part is legitimate.

The fraud vector opens up at the resale step. Whoever holds the shares first, in this case Spaventa's entities, can sell them again to a second vehicle, the retail-facing fund, at whatever price that second sale is structured to charge. If the seller and the manager of the buying fund are the same person or affiliated entities, and if there's no independent party checking the price, the seller can set the resale price wherever they want. The investor sees a single number: "price per share, $58.50." They have no way of knowing that number includes a spread that has nothing to do with the company's actual valuation and everything to do with how much the middleman decided to keep.

This is functionally identical to markup abuse elsewhere in finance: bond dealers marking up prices to retail clients without disclosure, or insurance products with commissions buried in the premium. What makes pre-IPO deals especially exploitable is the absence of a public price. When a stock trades on an exchange, you can look up what everyone else paid five minutes ago. Private company shares have no such reference point available to a retail investor. The manager can say "we got this at a great price" and there is no Bloomberg terminal to check it against. The investor is trusting the seller's word about the seller's own cost basis, exactly the situation the SEC alleges Spaventa exploited, at markups the complaint says ranged from 27% to 91%.

The second layer described in the complaint compounds the problem. If the fund a retail investor puts money into doesn't actually hold the pre-IPO shares directly, but instead holds an interest in another fund that claims to hold the shares, each additional layer can carry its own fee and its own opacity. The SEC alleges more than 90% of the funds' holdings here were structured this way. Every layer between the investor's dollar and the actual share is a place a fee can hide, and marketing materials describing a "direct" purchase from insiders don't tell you whether that's true two or three steps removed from where your money sits.

None of this means pre-IPO access funds are inherently fraudulent. Reputable platforms and registered broker-dealers arrange secondary transactions in private companies every day, with disclosed fees and independent valuation checks. The problem this case illustrates isn't pre-IPO investing itself. It's what happens when the person selling you the shares, the person managing your fund, and the person setting the price are all the same undisclosed party.

A due-diligence checklist for any pre-IPO access fund

I think every investor considering a pre-IPO fund, family office allocation, or SPV should be able to answer these questions before wiring money, and should walk away if the manager can't or won't answer them clearly.

• Where did the shares come from, exactly? Ask for the chain of custody: who held the shares before the fund did, and how many hands they passed through. A fund that can't name its immediate seller is asking you to trust a black box.
• What did the fund actually pay per share, and what are you paying? These should be two separate, disclosed numbers with the difference itemized as a fee, not folded silently into a single "price per unit." A memorandum that only shows the price you're paying, never the fund's acquisition cost, is a disclosure gap worth walking away from.
• Is there a related-party transaction, and was it independently reviewed? If the entity selling the shares and the entity managing your fund share an owner, an office, or key employees, ask whether an independent board or a third-party valuation firm reviewed the transaction for fairness. The SEC's complaint alleges no such independent check existed here.
• Is the manager actually registered, and with whom? Check the SEC's Investment Adviser Public Disclosure database and FINRA's BrokerCheck yourself rather than taking a business card at face value. One of the entities here, The Spaventa Group, was never registered with the SEC in any capacity, according to the complaint, despite years of soliciting investors.
• How many layers sit between your money and the actual shares? Ask directly whether the fund holds the pre-IPO shares itself or holds an interest in another fund that claims to. Each additional layer is a place for an additional undisclosed fee.
• How were you solicited, and how is the salesperson compensated? A cold call from an unregistered sales agent earning an undisclosed commission is a different risk profile than a referral from a registered adviser under a fiduciary duty. Ask what percentage the person pitching you earns, in writing.
• What happens if you want out before an IPO or acquisition? Pre-IPO fund interests are illiquid by nature. There may be no market to sell into for years, and a delayed or canceled IPO can leave you locked in with no exit at any price.

None of these questions require special expertise. They require a willingness to ask them before signing, and a manager willing to answer in writing rather than over the phone.

What's at stake and what happens next

The SEC's complaint charges all four defendants with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, along with securities registration and broker-dealer registration requirements. Spaventa, TSG, and TSG Alpha Partners also face charges under the Investment Advisers Act of 1940, and Spaventa individually faces control person liability and aiding-and-abetting charges tied to the conduct of the entities he ran. The SEC is seeking permanent injunctions against future violations, disgorgement of the alleged ill-gotten gains plus prejudgment interest, civil monetary penalties, and a conduct-based injunction that would permanently bar Spaventa from acting as, or associating with, any broker, dealer, or investment adviser.

The financial picture for investors described in the complaint is bleak. The SEC states that most fund investors have not recouped their investments, and that some have suffered total or near-total losses. That tracks with how the alleged scheme was structured: once 46% of an investor's capital is diverted to undisclosed fees before the money ever buys a genuine ownership stake, the underlying company's valuation has to climb well above that hurdle just to get investors back to even. Several of the private companies named in the complaint, including Anthropic and SpaceX, have not gone public and there is no set timeline for when or whether they will.

It's worth being precise about where this case stands as of this writing. The SEC filed a civil complaint. It has not obtained a judgment, and Spaventa has publicly denied the allegations and said he intends to defend himself in court. No criminal charges have been reported alongside the civil case. None of the companies named as the underlying pre-IPO investments, including Anthropic, SpaceX, Anduril, and Perplexity, are accused of any wrongdoing. The allegations concern how Spaventa's entities allegedly priced and marketed access to those shares, not the companies themselves. Litigation of this size and structural complexity, spanning eleven funds and multiple entities over roughly four and a half years, typically takes months to years to resolve, whether through settlement, summary judgment, or trial.

For accredited and sophisticated investors reading this, the practical takeaway isn't that pre-IPO investing is off-limits. It's that the entire category runs on trust in numbers you usually can't independently verify, which means the burden of verification sits on you before you wire money, not after a regulator files a complaint.

Frequently Asked Questions

Is investing in pre-IPO shares illegal or inherently risky beyond normal market risk?

Pre-IPO investing itself is legal and common among accredited investors, family offices, and institutional funds. The added risk comes from illiquidity, limited public information about the company's financials, and the possibility that an IPO never happens or happens at a lower valuation than hoped. The Spaventa case adds a separate risk on top of those: undisclosed markups that inflate your entry price regardless of how the underlying company performs.

How can I check whether a pre-IPO fund manager is actually registered with regulators?

Use the SEC's Investment Adviser Public Disclosure website to search for the firm and any individual adviser by name, and use FINRA's BrokerCheck tool to verify broker registration and look for disciplinary history. Both databases are free and public. In the Spaventa case, the complaint alleges The Spaventa Group itself was never registered with the SEC despite years of raising money from investors, which a five-minute database check would have surfaced.

What does a markup mean in a pre-IPO share sale, and why does it matter if it's disclosed?

A markup is the difference between what a middleman paid to acquire shares and the higher price they charge when reselling those shares to you. It only becomes a fraud issue when it's hidden rather than disclosed as a fee. A disclosed markup lets you evaluate whether the total cost still makes sense; an undisclosed one means you're paying a price you can't actually assess, because you don't know what portion reflects the company's value versus the seller's profit.

If the SEC's allegations are true, can investors in the Spaventa funds recover their money?

The SEC is seeking disgorgement of the alleged ill-gotten gains plus civil penalties, and recovered funds can sometimes be returned to harmed investors through a Fair Fund or similar distribution process, but that outcome depends on how much money is actually recoverable from the defendants and how the litigation resolves. The complaint itself states that most investors have not recouped their original investments, and disgorgement processes in cases like this often return only a fraction of losses, if any.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.