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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22949 / March 20, 2014

Securities and Exchange Commission v. Frank Mazzola et al., Civil Action No. No. 12-cv-1258 MMC (N.D. Cal. filed Mar. 14, 2012)

Manager of Pre-IPO Investment Funds Settles Fraud Claims

The Securities and Exchange Commission today announced that Frank Mazzola and the brokerage firm Felix Investments, LLC have agreed to resolve fraud charges against them and an affiliated investment adviser.  In the settlement, Mazzola and Felix Investments will pay a half-million dollars and Mazzola will be barred from the securities industry.  The SEC filed a complaint against Mazzola and the firms in federal court in San Francisco in 2012, alleging that they defrauded investors in funds created to purchase shares of Facebook, Twitter, and other technology companies prior to their initial public offerings.  

According to the SEC’s complaint, Mazzola and Felix Investments arranged to be paid secret commissions in connection with their funds’ acquisition of Facebook stock and on the sales of fund interests to new investors.  The complaint also alleges that they, along with their investment adviser, Facie Libre Management Associates, LLC, sold interests in the pre-IPO funds despite knowing the funds did not own all of the Facebook shares that they told investors.  The complaint further alleges that Mazzola and Felix Investments misrepresented the financial condition of Twitter, then a privately-held company, and misled investors about their attempt to acquire shares of Zynga Inc. stock.

Without admitting or denying the SEC’s allegations, Mazzola, Felix Investments, and Facie Libre Management Associates consented to entry of final judgment, which the court entered on March 10, 2014.  Under the terms of the settlement, Mazzola and Felix Investments will pay a total of $500,000 in disgorgement, prejudgment interest, and civil monetary penalties.  All three agreed to be permanently enjoined from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5(b) thereunder.  Mazzola and Facie Libre Management Associates additionally agreed to be permanently enjoined from violations of Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.

Mazzola, who lives in Upper Saddle River, N.J., further agreed to be barred from the securities industry, including association with any brokerage firm or investment adviser.  Under the terms of the settlement, Mazzola may continue his association with Felix Investments and an affiliated adviser, Felix Advisors, LLC, until not later than August 31, 2014, in order to facilitate orderly distribution of existing fund assets.  Mazzola agreed to retain an independent consultant to oversee his firms during his remaining association, as well as to refrain from raising money for the investment funds.  Mazzola will have the right to reapply to the securities industry in three years from the issuance of the order.

Felix Investments, as part of the resolution, also agreed to be censured by the SEC.

Previous release:  Litigation Release No. 22292 (Mar. 14, 2012).

 

http://www.sec.gov/litigation/litreleases/2014/lr22949.htm


Modified: 03/20/2014