Before a company goes through an initial public offering (IPO) on a public stock exchange, such as the NYSE or Nasdaq, certain investors may be given the opportunity to purchase shares. Typically, these shares are offered at a lower cost than the expected IPO price, giving investors the potential for significant gains if the company performs well after going public. However, this is a phase that many fraudsters may try to take advantage of in claiming that they had purchased shares from insiders at greatly reduced costs.
If you believe you have lost money to pre-IPO fraud, speak with a securities fraud attorney as soon as possible. A pre-IPO securities fraud lawyer from Silver Law Group can carefully review your claim and advise whether you may be eligible to join a pending or existing securities class action lawsuit.
Securities fraud can involve a wide range of investments, including stocks, bonds, options, and mutual funds. Fraudsters frequently use deceptive tactics to manipulate the price or mislead investors about the true value.
In the case of pre-IPO securities fraud, these activities are perpetrated by companies or individuals attempting to raise capital before an IPO. Due to regulations, pre-IPO investments are usually only accessible to accredited investors, such as venture capitalists, private equity firms, and high-net-worth individuals.
While investing in private companies before they go public can present a promising, legitimate opportunity for substantial gains, some offerings of pre-IPO shares can be attached to scams and other forms of fraud. The anticipated IPO may be a ruse to collect funds from unwitting investors when the sellers have no intention of bringing the business public.
In some cases, the underlying business may be legitimate, but the companies or individuals provide fraudulent information about it to investors in an effort to raise capital. Common examples of pre-IPO securities fraud include:
Investors should thoroughly investigate any pre-IPO opportunity, including the company’s financials, management team, and any regulatory filings. They should also verify if the person or company selling pre-IPO shares is registered with appropriate entities.
If someone is pushing you to invest immediately or guarantees significant returns, be cautious. High-pressure sales tactics and unqualified or unregistered sellers are major red flags that a pre-IPO investment may not be legitimate. If you have concerns that a potential pre-IPO investment may be fraudulent, contact an attorney right away who can help you understand your rights and legal options.
If you are a victim of securities fraud, it is crucial to consult with an attorney to assess your specific situation and determine the best course of action. The most common legal remedy for victims of securities fraud is filing a civil lawsuit against the perpetrator seeking damages related to your investment losses.
Securities class action lawsuits allow victims of pre-IPO fraud to file a case as a collective group against the party or parties who supported the fraud. A class action starts when one or more investors files a lawsuit against the company alleging violations of securities laws.
The court must decide whether to certify the class, meaning that a group of investors with similar claims can be represented in a single lawsuit. If the class is certified, the court will appoint a lead plaintiff to represent the class. The parties gather information through depositions and document requests to build their case.
Most pre-IPO securities class actions are settled out of court, though a court must review and approve any settlement agreement. Class members are typically notified of the settlement and have the right to opt out if they wish to pursue their own individual claims. A class action allows investors with a wide range of losses, including smaller losses, to participate in a lawsuit without having to file separate claims.
A securities class action also carries the added benefit of distributing the costs of litigation across the group of investors, with Silver Law Group only being paid if we secure a settlement or court victory.
Scott Silver and the attorneys at Silver Law Group advocate for investors harmed by federal securities law violations, including pre-IPO scams. A class action can be a viable route for investors harmed by the same fraudster to group their claims together and seek fair compensation.
If you suspect pre-IPO fraud, our attorneys can immediately get to work safeguarding your legal interests and protecting your right to compensation. These can be complex cases, which makes it vital to work with a legal team that has the experience, knowledge, and resources to handle your claim from start to finish. A pre-IPO securities fraud lawyer can determine if you qualify as a class member in a pending lawsuit or may be eligible to initiate new litigation. Contact us today to begin your free and confidential legal consultation.
