A former Malibu resident was found guilty of defrauding investors out of $3 million through false promises of pre-IPO stock shares of Alibaba.
Frank Harold Rosenthal, 48, who currently lives in New York City, pleaded guilty to two counts of wire fraud, the U.S., Attorney’s Office announced Monday.
Rosenthal is accused of scamming victims out of more than $3 million with “bogus claims he had access to stock shares of Alibaba prior to its initial public offering,” officials said.
Rosenthal falsely told victims he had inside connections at Goldman Sachs that would give him special access to purchase discounted shares of Alibaba, a popular Chinese e-commerce company.
With the help of a middleman, David Kunkle, Rosenthal made false claims and representations while also pressuring Kunkle to solicit funds from his relatives and acquaintances for the bogus investment opportunity, authorities said.
“To lend legitimacy to his fraudulent scheme, Rosenthal negotiated and drafted loan agreements and promissory notes with the victims” that promised significant returns on their loans and investments, according to court documents.
Rosenthal paid his earlier victims with money from his later victims for some time, officials said.
Instead of purchasing shares of Alibaba, Rosenthal used the stolen money to support his lavish lifestyle, which also included the rental of a Malibu home for $16,000 a month.
A sentencing hearing is scheduled for Oct. 13 where Rosenthal could face up to 40 years in federal prison as well as restitution.