SEC Charges Co-Founders of 777 Partners, 600 Partners With Fraud in $237M Offering
The U.S. Securities and Exchange Commission charged Joshua Wander, Steven Pasko, and two companies that they founded, co-managed, and controlled – 777 Partners LLC and 600 Partners LLC – with defrauding investors while raising approximately $237 million.
The SEC also charged Damien Alfalla, the companies’ former chief financial officer, for his alleged role in the scheme.
According to the SEC’s complaint, between January 2021 and May 2024, Wander, Pasko, and Alfalla misled investors about the companies’ financial condition, and fraudulently induced investments in a $237 million preferred equity offering, by falsely representing that the companies were earning, and would continue to earn, substantial positive net income sufficient to pay investors a 10% annual dividend. In fact, as alleged in the complaint, the companies were in a severe and worsening liquidity crisis and had no realistic prospects of earning net income sufficient to pay the dividend.
According to the complaint, Wander, age 44, and Alfalla, age 49, misused a credit facility, resulting in a $300 million overdraw that damaged the companies’ financial prospects. As alleged, Wander and Alfalla made false and misleading representations to investors about the companies’ prospects and ability to pay dividends, while concealing the $300 million overdraw and its causes. The complaint further alleges that Pasko, age 77, signed all investor subscription agreements, which incorporated false and misleading representations about the companies’ financial prospects, even though he knew or should have known of the credit facility overdraw and its negative effects on the companies’ financial prospects.
As alleged, Wander also misled investors when he represented that the proceeds of the offering would be used for general corporate purposes, when, in fact, Wander caused the companies to divert approximately $33 million of investor funds to Wander and Pasko personally.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Wander, 777 Partners, and 600 Partners with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The complaint charges Alfalla with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Sections 17(a)(1) and 17(a)(3) of the Securities Act. The complaint charges Pasko with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act. The complaint further seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.
In parallel actions, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Wander and Alfalla on the same day as the SEC action.
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