The Securities and Exchange Commission today announced charges against Christopher Kenji Dinelli and Jacob David “Kobe” Frankel for allegedly orchestrating a fraud scheme that raised more than $8.7 million from 35 investors through their fund, Beyond Alpha Ventures LLC (BAV), and advisory firm, Beyond Equity LLC.

According to the complaint, Dinelli, a former naval officer, targeted veterans as well as individuals who provide medical services to veterans, telling them and other investors that their money would be invested in the BAV fund that was represented to have an options trading strategy and/or affiliated special purpose vehicles (SPVs) that purported to hold pre-IPO securities in two private companies. To induce these investments, the defendants allegedly repeatedly made material misrepresentations concerning, among other things, the past performance of the fund and pre-IPO investments, the amount of assets under management, and BAV’s client base and current and past holdings. Despite consistent losses in the fund, the complaint alleges that Dinelli and Frankel continued to tout wildly successful returns of up to 153% and a sprawling client base, including in a document titled, “Trading Fund Overview 2024,” which claimed a “153% Net Return on Investment.”

“The bonds between service members are as strong, if not stronger, than in any other profession,” said Thomas P. Smith, Jr., Associate Director of the SEC’s New York Regional Office. “Through their alleged actions, the defendants took advantage of those relationships for greedy and self-serving purposes. We will hold them accountable for their actions.”

The complaint also alleges that without investors’ knowledge, the defendants diverted money provided by pre-IPO securities investors to the fund’s brokerage accounts, where the vast majority of it was lost due to failed options trades. In addition, the complaint alleges Dinelli misappropriated over $1 million and Frankel misappropriated over $340,000. 

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Dinelli and Frankel with violating the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and, additionally as to Frankel, the Investment Advisers Act of 1940. The complaint seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against both defendants. 

In a parallel criminal action concerning the same conduct, the U.S. Attorney’s Office for the Southern District of New York this week announced criminal charges against Dinelli and Frankel.

Investors can learn more about the risks of investing in pre-IPO offerings in this Investor Alert.