Investors thought they were buying pre-IPO OpenAI and SpaceX shares. Their cash went to strip clubs, Bloomingdale’s, and shopping on Amazon, SEC alleges

The Securities and Exchange Commission has charged two private fund advisers with allegedly mismanaging millions of dollars in investor assets by falsely claiming they were providing access to pre-IPO shares in companies like OpenAI, SpaceX, SandboxAQ, and Kraken. The SEC's investigation followed a series of recent charges alleging investors were deceived into believing they could invest in high-profile startups.

In one case, Owen Meyer, 35, was sued by the SEC for allegedly raising $18.5 million from nearly 100 investors and misappropriating $1.27 million of the funds. According to the complaint, Meyer spent over $18,000 of this money on personal entertainment at a strip club in April 2023, including payments totaling $18,600 for drinks, a rental fee, and tips.

When questioned about the transfer, Meyer invoked his Fifth Amendment rights. The SEC asserts that Meyer created 16 funds, each to purchase shares in a pre-IPO company, but never actually acquired any OpenAI shares. Another case involves former Navy officer Christopher Dinelli, 34, and Jacob Frankel, 32, charged with defrauding 35 investors of more than $8.7 million through their firm Beyond Alpha Ventures.

The SEC alleges the pair marketed their fund as holding stakes in SpaceX and xAI, when in fact the funds never held investments in those companies. The complaint states that Dinelli and Frankel pursued investors with claims of "153% net returns" and pre-IPO stakes in Kraken and AI software firm SandboxAQ. However, the SEC notes that the trading fund lost money in 13 of the 14 months it operated, and only about half of the $6 million raised for pre-IPO deals actually went into these deals.