DOJ Accuses Hedge Fund Dudes Of Fraud And Partying Like Goddamn Rockstars, But Mostly Fraud


A complaint filed by the Department of Justice and US Securities and Exchange Commission accuses some hedge fund dudes of selling fake pre-IPO shares of the most desirable companies on the planet to fund trips to the strip club, vacations to Las Vegas, pro sporting events, and nights at high-end hotels.

Javier Carlos Rios and his boss, JSG Capital Investments’ CEO and founder Jason Gill, stand accused by the DOJ of taking in $9 million for fake pre-IPO shares in Uber, Alibaba, and Airbnb. The DOJ accusations then claim the two diverted large portions of those funds for non-existent pre-IPO shares into funding a rockstar lifestyle.

You can read the full complaint on SEC.gov but this excerpt is the bread and butter of the charges:

Gill and Rios have used millions in investor money to fund their lifestyle, and to make Ponzi payments to earlier JSG investors. Gill has received over a million dollars of investor money in cash withdrawals, transfers to his personal bank account, the monthly rent at his personal residence, and the use of an expense account to pay for excursions to high-end restaurants and clubs, jaunts to Las Vegas casinos, gentlemen’s clubs, professional sporting events, high-end hotels, and luxury retail stores. Rios has received at least $1.7 million from the scheme, and spent additional investor money from a JSG-affiliated account to pay the monthly rent at his personal residence. In addition, Gill and Rios used over $500,000 in investor funds to pay for excursions to restaurants, nightclubs, and luxury hotels, transportation including airfare and car service, and purchases at retailers for furniture, clothing, and other accessories. To further the scheme, Gill and Rios used money from new investment into JSG to pay existing investors. Since September 2013, defendants have made approximately $4.2 million in Ponzi-like payments to JSG investors.

To be fair, anyone working at a hedge fund is spending money on high-end restaurants, clubs, sports events, luxurious hotels, and strip clubs…That’s just the culture. The important distinction here is that the funds being used to pay for these excursions are under scrutiny…

BusinessInsider.com reports:

Along the way, the DOJ said, Gill and Rios did repay small amounts to earlier investors using new investor money as “interest payments” to not arouse suspicion, “in a manner that was consistent with a classic Ponzi scheme.”
There’s no evidence that the group ever bought any pre-IPO shares of any tech company, including Uber, according to the DOJ.
The ride-hailing company Uber is among the world’s most valuable private companies, but it is known to have tight controls over its shares, and it dislikes unauthorized shares being on the market.

That last part is worth remembering, because if any of you bros are super thirsty for shares in Uber you should know that they’re ridiculously hard to come by and you should be VERY WARY if you see any of those shares being peddled on the secondary market.

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Anyways, you can read the full complaint on SEC.gov and/or click on over to BusinessInsider.com for more analysis.