Related Federal Cases
- Christopher Ferguson, Securities Fraud, New York 2020 · Texas
- Todd Faustin, Workers’ Compensation Fraud, New York NY, 2023 · New York
- Michael Smith, Billion-Stream Royalty Heist, New York, 2023 · Alabama
- Kenneth Thom, Investment Adviser Fraud, New York NY, 2026 · New York
- Michael Smith, AI-Fueled Streaming Scam, New York NY, 2023 · New York
Former Principal of Private Fund Charged in $386 Million Fraud Scheme
A former principal of a private fund has been charged with conspiracy, securities fraud, wire fraud, and investment adviser fraud in connection with a $386 million fraud scheme. Michael Castillero, also known as Michael Alejandro, and his co-defendants Francine Lanaia and Brian Martinsen, were accused of operating a scheme to defraud investors in a group of nine related private funds known as the StraightPath Funds.
According to the indictment, the defendants used boiler room-style call centers to market the StraightPath Funds to individual, non-professional investors, promising them the chance to invest in privately held companies expected to go public in the near future. The defendants allegedly pretended to offer investors the chance to acquire shares in pre-IPO companies at favorable prices in advance of an anticipated public offering, at which time, they claimed, the shares would be worth significantly more.
However, the defendants and their agents represented to existing and prospective investors in the StraightPath Funds that the defendants would earn no upfront fees in connection with the investment, when in fact they did. The defendants were able to divert nearly $75 million in investor funds to themselves over an approximately three-and-a-half-year period.
The indictment alleges that the defendants deleted records that had been subpoenaed by the Securities and Exchange Commission (SEC) in an attempt to conceal their fraud. The co-defendants Lanaia and Martinsen were taken into custody earlier today and presented before U.S. Magistrate Judge Sarah L. Cave. Castillero is expected to be presented tomorrow.
The case has been assigned to U.S. District Judge Jesse M. Furman. U.S. Attorney Damian Williams said, "As alleged, Michael Castillero, Francine Lanaia, and Brian Martinsen, the founders and former owners of the StraightPath Funds, took advantage of the relative lack of information and lower trading volumes for non-public companies by offering retail investors interests in shares of pre-IPO companies at inflated prices, allowing the defendants to skim off the top without investors realizing they’d been duped."
USPIS Inspector in Charge Daniel B. Brubaker said, "These individuals used the U.S. Mail to facilitate their criminal activities by allegedly devising a fraud scheme designed to swindle innocent investors of their hard-earned money. The U.S. Postal Inspection Service is committed to uncovering investment scams and protecting the public from becoming a victim to these schemes that claim millions of dollars each year."
According to the allegations in the Indictment unsealed today in Manhattan federal court, the defendants engaged in a scheme to defraud investors in the StraightPath Funds from at least in or about 2017 through at least in or about April 2022. The defendants were able to raise approximately $386 million from hundreds of investors.
The indictment charges the defendants with conspiracy, securities fraud, wire fraud, and investment adviser fraud in connection with their management of the StraightPath Funds. Castillero and Martinsen are also charged with conspiracy to obstruct justice and obstruction of justice in connection with their deletion of records that had been subpoenaed by the SEC.
Mandatory Facts: Defendant’s Real Full Name: Michael Castillero, also known as Michael Alejandro; Exact Criminal Charges: Conspiracy, securities fraud, wire fraud, and investment adviser fraud; City and State: New York; Exact Date: April 2022; Sentence or Outcome: Currently pending; Dollar Amount: $386 million.
Key Facts
- State: New York
- Category: White Collar Crime|Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
ðŸâ€Â’ Get the grimiest stories delivered weekly. Subscribe free →
MORE FEDERAL CRIME NEWS
US NewsUS NewsUS NewsUS News