The founders of StraightPath Venture Partners received prison sentences for a $386 million pre-IPO fraud scheme. Michael Castillero received 11 years, while Brian Martinsen and Francine Lanaia received 10 and 8 years respectively. The trio defrauded over 2,000 investors between 2017 and 2022 by falsely claiming to invest in companies poised for successful IPOs.

The founders grossly inflated share values of private firms and charged hidden fees, skimming $75 million for themselves. They used boiler-room-style call centers to attract investors who thought they were getting favorable rates. The SEC identified Impossible Foods Inc. and Kraken as companies mentioned in their fraudulent scheme, though the trio concealed their previous FINRA bars from the securities industry.

Manhattan US Attorney Jay Clayton emphasized that private market frauds will face vigorous prosecution. A court-appointed receiver is administering StraightPath to return remaining assets to victims. The founders must pay $115 million in restitution, providing some relief to investors who lost millions in the elaborate pre-IPO investment scam.