There are bad investments, and then there is JSG Capital.
The San Francisco, California-based “hedge fund” raised more than $9.3 million from investors selling fake pre-IPO shares in Uber, Airbnb and Alibaba, according to the Department of Justice. The firm’s founders, Jason Gill, 48, and Javier Carlos Rios, 33, were arrested by the FBI in May shortly after a federal grand jury indicted the pair on May 24.
The two are accused stealing at least $5.5 million for personal excursions to expensive restaurants, luxury retail stores, Las Vegas casinos, strip clubs, and sporting events. The Securities and Exchange Commission says that less than 1% of investor funds were transferred to brokerage accounts and no ‘pre-IPO’ company shares were ever purchased. “JSG is a classic investment scam and Ponzi scheme,” the SEC complaint states (pdf). It claims $4.2 million in “Ponzi-like payments” were made to reassure JSG investors.
Gill and Rios allegedly ran a deceptive fundraising campaign targeting middle-class investors. According to press releases reported by CFO magazine (JSG’s website is now offline), the firm promised investors “access to alternative investment strategies that were previously only available to the one-percenters” and touted “close ties” with Silicon Valley venture capital firms such as Sequoia Capital and Andreessen Horowitz to secure the pre-IPO shares.
Gill appears to have lied about his background as well. The CEO’s LinkedIn profile says he founded JSG in 2006 after a six-year stint working as an investment banker at Morgan Stanley and graduating with an MBA from the University of California’s Berkeley Haas School of Business. The SEC could find no record of Gill working at Morgan Stanley and Berkeley denied Gill held an MBA degree from the school, according to CBS 5.
The DoJ’s complaint (pdf) charges both defendants with two wire fraud counts carrying a maximum sentence of twenty years in prison each and millions in potential fines.
The image above was taken by Tannoy and shared under a GNU Free Documentation License, Version 1.2 on Wikicommons.