Senior Fund Executives and Salespeople Charged in Connection with $60 Million Pre-IPO Fraud Scheme

Press Release

Defendants Lied to Investors Regarding Hidden Markups and Fees and Stole Millions of Dollars in Customer Funds for Themselves

Earlier today, at the federal court in <_w3a_sdtpr><_w3a_sdt combobox="t" docpart="7F7D5D7E590C408EA9E63C2C31EAD929" id="387929827"><_w3a_listitem listvalue="Insert location"> <_w3a_listitem datavalue="Brooklyn" listvalue="Brooklyn"> <_w3a_listitem datavalue="Central Islip" listvalue="Central Islip"> Brooklyn, a five-count<_w3a_sdt combobox="t" docpart="872F1980242F4394AF97C5A6A50A1A93" id="-1431656830"><_w3a_listitem listvalue="Choose an item."> <_w3a_listitem datavalue="a complaint" listvalue="a complaint"> <_w3a_listitem datavalue="an indictment" listvalue="an indictment">indictment was unsealed charging John Cangialosi, Peter Girgis, Gene Sarabella, also known as "Jerry," Enrico Carini, also known as "Ed," and Caner Otar, also known as "John," with conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, investment adviser fraud, and money laundering conspiracy in connection with their scheme to defraud investors in Max Infinity Management LLC, Elder Fund Management LLC, and a related series of funds (collectively, "Max Infinity"). The defendants' fraudulent misrepresentations about the operation of the funds, including excessive and undisclosed share price markups charged to investors, allowed them to raise more than approximately $60 million from investors and divert approximately $27 million for the benefit of the defendants and other Max Infinity salespeople.

Breon Peace, United States Attorney for the Eastern District of New York, and <_w3a_sdt docpart="79DFB0CAB7B1466F885DF29304115303" dropdown="t" id="-437676849" sdttag="Agency head" title="Agency head"><_w3a_listitem datavalue="Bryan Miller, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives, New York Division (ATF)" listvalue="Bryan Miller, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives, New York Division (ATF)"> <_w3a_listitem datavalue="Ivan J. Arvelo, Special Agent-in-Charge, U.S. Department of Homeland Security, Homeland Security Investigations (HSI), New York" listvalue="Ivan J. Arvelo, Special Agent-in-Charge, U.S. Department of Homeland Security, Homeland Security Investigations (HSI), New York"> <_w3a_listitem datavalue="Daniel Brubaker, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS)" listvalue="Daniel Brubaker, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS)"> <_w3a_listitem datavalue="Edward Caban, Commissioner, New York City Police Department (NYPD)" listvalue="Edward Caban, Commissioner, New York City Police Department (NYPD)"> <_w3a_listitem datavalue="Teri L. Donaldson, Inspector General, Department of Energy (DOE)" listvalue="Teri L. Donaldson, Inspector General, Department of Energy (DOE)"> <_w3a_listitem datavalue="Anne T. Donnelly, District Attorney, Nassau County District Attorney (NCDA)" listvalue="Anne T. Donnelly, District Attorney, Nassau County District Attorney (NCDA)"> <_w3a_listitem datavalue="Thomas Fattorusso, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI)" listvalue="Thomas Fattorusso, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI)"> <_w3a_listitem datavalue="Patrick Freaney, Special Agent-in-Charge, United States Secret Service (USSS)" listvalue="Patrick Freaney, Special Agent-in-Charge, United States Secret Service (USSS)"> <_w3a_listitem datavalue="Eric Gonzalez, District Attorney, Kings County District Attorney (KCDA)" listvalue="Eric Gonzalez, District Attorney, Kings County District Attorney (KCDA)"> <_w3a_listitem datavalue="Steven G. James, Acting Superintendent, New York State Police (NYSP)" listvalue="Steven G. James, Acting Superintendent, New York State Police (NYSP)"> <_w3a_listitem datavalue="Melinda Katz, District Attorney, Queens County District Attorney (QCDA)" listvalue="Melinda Katz, District Attorney, Queens County District Attorney (QCDA)"> <_w3a_listitem datavalue="Sharon MacDermott, Special Agent-in-Charge, Social Security Administration, Office of the Inspector General (SSA-OIG)" listvalue="Sharon MacDermott, Special Agent-in-Charge, Social Security Administration, Office of the Inspector General (SSA-OIG)"> <_w3a_listitem datavalue="Michael McMahon, District Attorney, Staten Island District Attorney (SIDA)" listvalue="Michael McMahon, District Attorney, Staten Island District Attorney (SIDA)"> <_w3a_listitem datavalue="Michael Nestor, Inspector General, The Port Authority of New York and New Jersey, Office of the Inspector General (PANYNJ-OIG)" listvalue="Michael Nestor, Inspector General, The Port Authority of New York and New Jersey, Office of the Inspector General (PANYNJ-OIG)"> <_w3a_listitem datavalue="Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD)" listvalue="Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD)"> <_w3a_listitem datavalue="Kenneth J. Siegler, Resident Agent-in-Charge of the Defense Criminal Investigative Service (DCIS), New York Resident Agency" listvalue="Kenneth J. Siegler, Resident Agent-in-Charge of the Defense Criminal Investigative Service (DCIS), New York Resident Agency"> <_w3a_listitem datavalue="Sidney Simon, Special Agent-in-Charge, U.S. Department of Commerce (DOC), Office of Export Enforcement, New York Field Office" listvalue="Sidney Simon, Special Agent-in-Charge, U.S. Department of Commerce (DOC), Office of Export Enforcement, New York Field Office"> <_w3a_listitem datavalue="Christie M. Curtis, Acting Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI)" listvalue="Christie M. Curtis, Acting Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI)"> <_w3a_listitem datavalue="Frank A Tarentino III, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division" listvalue="Frank A Tarentino III, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division"> <_w3a_listitem datavalue="Raymond A. Tierney, District Attorney, Suffolk County District Attorney (SCDA)" listvalue="Raymond A. Tierney, District Attorney, Suffolk County District Attorney (SCDA)"> <_w3a_listitem datavalue="Robert Waring, Acting Commissioner, Suffolk County Police Department (SCPD)" listvalue="Robert Waring, Acting Commissioner, Suffolk County Police Department (SCPD)"> Christie M. Curtis, Acting Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI) announced the <_w3a_sdt docpart="F456831FB7CF4E28AF1317A7602DBCAE" dropdown="t" id="-482921970" sdttag="Topics" title="Topics"><_w3a_listitem datavalue="charges" listvalue="charges"> <_w3a_listitem datavalue="deferred prosecution agreement" listvalue="deferred prosecution agreement"> <_w3a_listitem datavalue="extradition" listvalue="extradition"> <_w3a_listitem datavalue="extraditions" listvalue="extraditions"> <_w3a_listitem datavalue="guilty plea" listvalue="guilty plea"> <_w3a_listitem datavalue="guilty pleas" listvalue="guilty pleas"> <_w3a_listitem datavalue="investigation" listvalue="investigation"> <_w3a_listitem datavalue="sentence" listvalue="sentence"> <_w3a_listitem datavalue="sentences" listvalue="sentences"> <_w3a_listitem datavalue="settlement" listvalue="settlement"> <_w3a_listitem datavalue="verdict" listvalue="verdict"> <_w3a_listitem datavalue="verdicts" listvalue="verdicts"> charges.

"As alleged, based on false promises the defendants bilked investors out of millions of dollars," stated United States Attorney Breon Peace. "They lied about how they made money and promised near-certain returns on investment when, in truth, they charged astonishing markups, at times greater than 95%, and defrauded investors. My office will vigorously prosecute those who seek to take advantage of the investing public for their own greed."

Mr. Peace expressed his appreciation to the Securities and Exchange Commission (SEC), Washington, D.C. Home Office, for its significant cooperation and assistance during the investigation.

"These five defendants allegedly charged undisclosed markup fees to defraud almost $60 million from investors of Max Infinity, routing nearly half of the proceeds to their personal wallets. Luring in investors based on false success stories and concealing additional expenses betrays their belief that the money is being handled appropriately. The FBI will continue to disrupt fraudulent schemes rooted in deceit and investigate anyone seeking to make an unlawful quick buck at the cost of another," stated FBI Director Curtis.

As set forth in the indictment, Max Infinity was a New York City based manager of investment funds that bought and sold stock issued by privately held companies that anticipated an initial public offering (IPO). Principals Cangialosi, Girgis, and Sarabella, along with sales team leaders Carini and Otar, engaged in a scheme to defraud investors and prospective investors in Max Infinity by misrepresenting, among other things, that Max Infinity took no upfront fees, was registered with the SEC, and sourced pre-IPO shares directly from the issuing companies. The defendants also fabricated Max Infinity's track record - claiming on their website and to investors that Max Infinity had returned significant profits to investors in prior successful IPOs-when in reality, Max Infinity had no such previous investments. Additionally, Cangialosi and Girgis were both, at various times, under suspension by the Financial Industry National Regulatory Authority (FINRA) and hid their involvement in Max Infinity from investors.

Even though investors were told that Max Infinity did not make money until customers made money, Cangialosi, Girgis, and Sarabella paid themselves distributions and paid salespeople commissions out of excessive, undisclosed markups charged to investors. From these distributions, Sarabella directed the purchase of more than a million dollars in luxury watches. Salespeople also utilized scripts that falsely assured investors that the firm had an impressive track record of success in prior IPO deals, conducted extensive due diligence, and had specialized access to top deals. At the principals' direction, salespeople lulled investors into a false sense of security by falsely claiming SEC oversight over their fund and its investments.

The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.

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 crimes that defendants allegedly committed.<_w3a_sdtpr>

If you believe that you or someone you know was victimized by the defendants, please contact the FBI by email at: [email protected] or by calling 1-800-CALL-FBI.

The government's case is being handled by the Office's Business & Securities Fraud Section. Assistant United States <_w3a_sdt docpart="AC84F0F23D934CB684A96F99545F73EC" dropdown="t" id="1719781811"><_w3a_listitem listvalue="Choose an item."> <_w3a_listitem datavalue="Attorney" listvalue="Attorney"> <_w3a_listitem datavalue="Attorneys" listvalue="Attorneys"> Attorneys Sarah M. Evans, Eric Silverberg, John O. Enright and Lorena Michelen are in charge of the prosecution, with assistance from Paralegal Specialists Sarah Burn and Liam McNett.

The <_w3a_sdt docpart="AEDBD003A48B4343A4224B491686B7EB" dropdown="t" id="1174685880"><_w3a_listitem listvalue="Choose an item."> <_w3a_listitem datavalue="Defendant" listvalue="Defendant"> <_w3a_listitem datavalue="Defendants" listvalue="Defendants"> Defendants:

<_w3a_sdt docpart="75E1A5195BE84171AD2369079D0A045B" id="575010685">JOHN CANGIALOSI
Age: 43<_w3a_sdt docpart="F5A3719FCAAF4149A6FF5A7AAFC1FB1C" id="-225534894">
Manalapan, <_w3a_sdt docpart="87F00D122F944ED09C6FBF3A8A3E1CC0" id="1586800551">New Jersey

<_w3a_sdt docpart="FB998E7EF1B44AE19425332268B553D8" id="100545161">PETER GIRGIS
Age: 43<_w3a_sdt docpart="0E161D10EC18479E878BEB763E5A5A9F" id="164358871">
Staten Island, <_w3a_sdt docpart="5DF391D06DB74FE88C81F858D3CB3BA8" id="-1651506655">New York

<_w3a_sdt docpart="78BCFE678D5F48F0A73A4BA6E4F343CA" id="756487182">GENE SARABELLA (also known as "Jerry")
Age: 36<_w3a_sdt docpart="EA37E92E3075455B897648E532DC048D" id="-1139337264">
Monroe, <_w3a_sdt docpart="4EB70BE974F04F60874A6A87EE6EFAC5" id="-493876175">New Jersey

<_w3a_sdt docpart="46A91650B80B4240BCDCF83395C9D4F4" id="1826631037">ENRICO CARINI (also known as "Ed")
Age: 39<_w3a_sdt docpart="DB9D26A37A93425795822EBF0C4ADA73" id="-780420702">
Staten Island, <_w3a_sdt docpart="FC72067430974BF88BAD900FF2EB0936" id="-376007999">New York

<_w3a_sdt docpart="64CCBEB02BDD4DA5A831CB3460851DAD" id="889376741">CANER OTAR (also known as "John")
Age: 37<_w3a_sdt docpart="7D8CF1920EFA407F95916A2813AF8BCE" id="-254278477">
Brooklyn, <_w3a_sdt docpart="34FA9E7A2A63417494B700899199494D" id="-1831442364">New York

E.D.N.Y. Docket No. <_w3a_sdt docpart="04C11D7D711B49F6A53AC1D7587BA6AF" id="-1950002052">24-CR-363

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Updated September 12, 2024

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