Former Principals of “Pre-IPO” Fund Plead Guilty to $65 Million Fraud and Money Laundering Schemes

Earlier today, in federal court in Brooklyn, John Cangialosi, Peter Girgis, and Gene Sarabella, also known as “Jerry,” pleaded guilty to all counts of a five-count indictment charging them with conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud, investment adviser fraud, and money laundering conspiracy.  The proceedings were held before United States District Judge Carol Bagley Amon.  When sentenced, the defendants each face up to 60 years in prison.  The defendants had been scheduled to go to trial on January 12, 2026.

Joseph Nocella, Jr., United States Attorney for the Eastern District of New York and Christopher G. Raia, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI) announced the guilty pleas.

“The defendants were the architects of a vast fraud scheme targeting investors here in the Eastern District of New York and all throughout the country,” stated United States Attorney Joseph Nocella. “They hid excessive fees, concealed their identities, and lied about the securities they sold to investors.  They then used investor funds to enrich themselves, principally through the purchase of millions of dollars in luxury watches. The Office is committed to protecting the public from predatory fund managers who get rich deceiving investors out of their hard-earned savings.”

Mr. Nocella expressed his appreciation to the Securities and Exchange Commission (SEC), Washington, D.C. Home Office, for its significant cooperation and assistance during the investigation.

As set forth in court filings and during court hearings, the defendants operated Max Infinity Management LLC, Elder Fund Management LLC, and a related series of funds (collectively, Max Infinity), which operated as a boiler-room style call center.  Max Infinity marketed investments in securities of privately-held companies that were purportedly planning to go public through an initial public offering (IPO) in the immediate future.  The defendants made numerous material misrepresentations and omissions about the terms and structure of their investments and Max Infinity itself.  For example, among other things, the defendants and their employees falsely claimed that Max Infinity would make money only when its investors made money through a 20% share of the profits upon an eventual IPO.  In truth, Max Infinity secretly charged investors a significant mark-up, at times more than 95% of the value of an investment, and paid commissions to sales agents from investor capital, sometimes 15% of the value of each investment, all of which the defendants hid from investors.

The defendants also lied to investors about when and how Max Infinity acquired interests in pre-IPO companies, the use of investor funds, Max Infinity’s track record of performance, and the returns they could expect on their investments.  For instance, the defendants and their employees told investors that Max Infinity acquired shares directly from the issuers and from the issuers’ employees.  In fact, Max Infinity acquired the majority of the interests that it sold from other investment funds or through online platforms that were widely available to the investing public.  The defendants and their employees told investors that “shares” were “in inventory,” and that investor money would be held in escrow. In truth, in many cases the share interests had not yet been purchased and the defendants comingled and spent nearly all investor capital, including through secret distributions to themselves totaling millions of dollars.  The defendants and their employees also falsely claimed to investors that Max Infinity had conducted extensive due diligence and had a history of similar, successful transactions.  For instance, Max Infinity employees claimed that Max Infinity had invested in, among other companies, Palantir, Facebook, and Airbnb.  In truth, all of these companies went public before Max Infinity was even founded, and Max Infinity had never returned a profit to any investor.

The defendants further misled investors about Max Infinity itself and their involvement in the company.  Max Infinity employees claimed to investors that Max Infinity was “registered” with the SEC and filed regular reports with the SEC. To lull prospective investors, the defendants and their employees sent clients a link to a website that purported to show that Max Infinity was registered with the SEC when it was not. They also took steps to hide Girgis’s and Cangialosi’s roles at Max Infinity from regulators, investors and prospective investors, because the two were subject to staggered, nine-month suspensions imposed by the Financial Industry Regulatory Authority (FINRA) and had lengthy disciplinary histories.

As part of their criminal scheme, the defendants used scripts with high-pressure sales tactics and solicited investments from elderly victims who were particularly susceptible to their lies. Among other false claims, scripts used by the defendants promised “triple digit returns,” that securities sold marketed by Max Infinity were “dirt cheap,” and that the company spent “millions of dollars, sometimes tens of millions on research before we ever recommend an investment to a client.”  The defendants received millions of dollars of profits from their scheme, which they laundered through various purchases, including dozens of high-end watches.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States  Attorneys Sarah M. Evans, Nicholas M. Axelrod and Eric Silverberg are in charge of the prosecution, with assistance from Paralegal Specialist Liam McNett.  Assistant United States Attorney Michael Castiglione of the Office’s Asset Forfeiture Section is handling forfeiture matters.

Defendants:

JOHN CANGIALOSI
Age:  44
Manalapan, New Jersey

PETER GIRGIS
Age: 44
Staten Island, New York

GENE SARABELLA (also known as “Jerry”)
Age: 37
Monroe, New Jersey

Defendants Who Previously Pleaded Guilty:

ENRICO CARINI (also known as “Ed”)
Age: 40
Staten Island, New York

CANER OTAR (also known as “John”)
Age: 38
Brooklyn, New York

E.D.N.Y. Docket No. 24-CR-363 (CBA)