Enforcement News: SEC Charges Founders and Their Two Companies with Fraud in $237 Million Preferred Equity Offering

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Posted on: Nov 26 2025

On November 18, 2025, the Securities and Exchange Commission (“SEC” or “Commission”) announced that, on October 16, 2025, it charged Joshua Wander (“Defendant A”), Steven Pasko (“Defendant B”), 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 Commission also charged Damien Alfalla (“Defendant C”), the companies’ former Chief Financial Officer, for his role in the alleged fraud.

According to the SEC’s complaint, between January 2021 and May 2024, Defendants 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 by the SEC, 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 SEC, Defendants A and C misused a credit facility, resulting in a $300 million overdraw that damaged the companies’ financial prospects. As alleged, these Defendants 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 SEC further alleged that Defendant B signed all investor subscription agreements, which incorporated false and misleading representations about the companies’ financial prospects, even though he allegedly knew or should have known of the credit facility overdraw and its negative effects on the companies’ financial prospects. As alleged, Defendant A also misled investors when he represented that the proceeds of the offering would be used for general corporate purposes, when, in fact, said the SEC, Defendant A caused the companies to divert approximately $33 million of investor funds to himself and Defendant B personally.

By March 2023, the alleged scheme began to unravel. One of the firm’s lenders confronted Defendant A about allegations of double-pledged assets. Defendant A allegedly claimed (falsely) that there had been an error caused by 777 Partners’ antiquated computer system. A few days later, Defendant A again allegedly assured the lender (falsely), among other things, that the double-pledging had been inadvertent. The SEC alleged these representations and assurances were false.

In October 2024, the High Court in London issued a winding-up order, formally declaring 777 Partners bankrupt. According to the SEC, 777 Partners still owes its lenders hundreds of millions of dollars.

The SEC filed its complaint in the U.S. District Court for the Southern District of New York. In the complaint, the SEC charged Defendant A, 777 Partners, and 600 Partners with violating Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933 (the “Securities Act”). The SEC charged Defendant C 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 SEC charged Defendant B with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act. The SEC 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 Defendants A and C on the same day as the SEC action.[1]

The U.S. Attorney charged Defendant A with conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, and securities fraud. Defendant C previously pled guilty to an information before U.S. District Judge Arun Subramanian on October 14, 2025, in connection with his participation in the alleged fraudulent scheme at 777 Partners. Defendant C is cooperating with the government.

“As alleged, [Defendant A] used his investment firm, 777 Partners, to cheat private lenders and investors out of hundreds of millions of dollars by pledging assets that his firm did not own, falsifying bank statements, and making other material misrepresentations about 777’s financial condition,” said U.S. Attorney Jay Clayton. “When financial firms lie to their lenders, they do not merely breach contracts. They undermine the integrity and stability of our credit markets and our financial system more broadly.”

FBI Assistant Director in Charge Christopher G. Raia also commented on the charges: “[Defendant A] and [Defendant C], the cofounder and CFO respectively of the 777 Partners investment firm, allegedly stole more than $500 million from his company’s lenders and investors through fabricated lies of success and doctored financial records. The defendants’ alleged deceit targeted the wallets of his trusting stakeholders to obfuscate the failing fiscal ventures of the business.”

Takeaway

As discussed, the alleged scheme to defraud involved raising $237 million through a preferred equity offering while concealing a severe liquidity crisis and misusing a $300 million credit facility. Such a large-scale alleged fraud demonstrates how complex financial structures can be exploited to mislead investors and lenders.

The complexity of the alleged fraud also underscores the multiple layers of purported deception. Defendants allegedly falsified financial statements, misrepresented dividend sustainability, and diverted $33 million for personal use.

Additionally, the alleged scheme highlights the problem of internal financial governance failures that are not readily discernible to investors. The involvement of, and apparent manual override by, top executives—including the co-founder and CFO—highlights systemic governance breakdowns that can occur in an alleged complex scheme to defraud.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] It must be remembered that an indictment merely alleges that crimes have been committed. Like all defendants, defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Tagged with: SEC Enforcement Actions, Securities, Securities and Exchange Commission, Securities Fraud