Criminal Cases

Man Pleads Guilty to Scamming Investors Out of Millions For Bogus Pre-IPO Alibaba Stock

Man Pleads Guilty to Scamming Investors Out of Millions For Bogus Pre-IPO Alibaba Stock

A bicoastal man has pleaded guilty to charges related to scamming investors out of over $3 million for bogus shares of pre-IPO Alibaba stock. 

Frank Harold Rosenthal, previously of Malibu, California and currently of New York City, this week pleaded guilty to two counts of wire fraud related to claims that he had access to shares of Alibaba prior to its initial public offering when, in reality, he did not.  

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Credit: MoMo Productions/Getty Images

According to an official release from the IRS, as part of Rosenthal's plea, he admitted to making false claims of having inside connections at Goldman Sachs, giving him the ability to purchase discounted shares of Alibaba before its IPO.  The Chinese e-commerce powerhouse had its initial public offering on the New York Stock Exchange on September 19, raising $25 billion. It was the largest IPO in world history at the time.

Court documents confirm that Rosenthal's scheme involved a middleman, David Kunkle, who was pressured in soliciting friends and acquaintances to become investors.

Rosenthal went to great lengths to make his scam appear legitimate, drafting loan agreements and promissory notes that assured his victims they would receive excellent returns on their initial investments. After his victims paid, Rosenthal continued stringing them along by, among other things, fraudulently claiming that Alibaba shares had been purchased and sold. Rosenthal paid illegitimate dividends to early investors using later investors' funds.

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Photographer: Elevated Images/Getty Images

The IRS notes that no actual shares of e-commerce stock were ever purchased. Rosenthal instead used the money to pay for extravagant lifestyle costs, including $16,000 monthly rent for a Malibu mansion. 

United States District Judge Fernando L. Aenlle-Rocha will sentence Rosenthal on October 13, 2023. The accused faces a statutory maximum sentence of 40 years in federal prison, and will likely be ordered to pay restitution.

The IRS Criminal Investigation Division (IRS-CI) led the investigation into Rosenthal's crimes.

What do you think about this financial scam?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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