Man Receives 16-Year Prison Sentence for False Claims Around Investments

A man was sentenced to nearly 16 years in prison for orchestrating a fraud related to Alibaba’s 2014 initial public offering (IPO).

Frank Harold Rosenthal claimed to have a connection at Goldman Sachs and convinced investors that he could secure pre-IPO shares in Alibaba, Bloomberg reported Friday (Nov. 10). However, it was later revealed that Rosenthal had no such connection and used the money for personal gain.

Rosenthal pleaded guilty in June to collecting approximately $4 million from investors based on false claims, according to the report.

In the scam, Rosenthal created a fake email account for a non-existent Goldman employee to convince his victims of the legitimacy of his investment opportunity, the report said. Prosecutors revealed that he went to great lengths to enhance the attractiveness of his scheme, including fabricating friendships with influential individuals.

Rosenthal promised individuals “monumental returns” on their investments, per the report. One victim, a retired businessman and full-time caregiver for his wife, invested with Rosenthal to avoid personal bankruptcy. In addition to the money lost in the Alibaba IPO scam, the victim also gave Rosenthal over $1.2 million for a cannabis dispensary venture, resulting in a total loss of $2.8 million.

The sentencing of Rosenthal to 188 months in prison by U.S. District Judge Fernando L. Aenlle-Rocha in Los Angeles is longer than the 10 years sought by prosecutors, according to the report. Rosenthal was also ordered to pay over $1.1 million in restitution to his victims.

The Alibaba IPO, which took place on the New York Stock Exchange, was highly anticipated and marked the largest IPO at the time, with a value of $22 billion, the report said. Goldman Sachs served as the lead underwriter for the IPO.

The Federal Trade Commission (FTC) reported in March that investment scams reaped a significant share of the $8.8 billion that consumers lost to various fraud schemes in 2022. The amount of money lost to fraud schemes during that year was 30% higher than the previous year’s tally, and the amount lost to investment scams more than doubled during that same period.

In October, the FTC reported that investment scams also account for a growing share of the reported losses from scams originating on social media. During the first half of 2023, investment scams comprised 53% of the total reported losses to scams using social media as a contact method.

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