SEC charges Adit Ventures and CEO in alleged pre-IPO fraud scheme

The US Securities and Exchange Commission has charged New York-based investment adviser Adit Ventures Management LLC, its chief executive Eric Munson, and three affiliated general partners with defrauding investors. The allegations centre on conduct spanning from April 2019 to December 2024, involving investments in pre-IPO shares such as those of SpaceX and Klarna, alongside the misappropriation of client assets and the charging of millions in undisclosed fees.

According to the complaint filed in the U.S. District Court for the Southern District of New York, the defendants used false claims and promises to persuade investors to contribute capital. The SEC alleges Munson solicited an investor by falsely claiming that a fund owned shares of a private, pre-IPO company. The complaint further states that Adit Ventures Management failed to register as an investment adviser, violating the registration provisions of the Investment Advisers Act of 1940.

The regulators allege the defendants regularly used client capital for their own benefit, including taking unsecured loans from funds on favourable terms. These transactions were not authorised by fund documents and were generally not disclosed to investors. Additionally, the defendants allegedly overcharged client funds millions in unauthorised acquisition fees and improperly pledged client assets as collateral for a $10 million line of credit, which was used in part to pay off the defendants’ own obligations.

The complaint also details improper transactions involving pre-IPO shares, where the defendants bought shares and then caused client funds to purchase those same shares at a higher price. This occurred while misrepresenting the true acquisition cost to investors and without obtaining the requisite consent for these principal transactions. The SEC charged the defendants with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Without admitting the allegations, the defendants consented to a permanent injunction and agreed to pay disgorgement with prejudgment interest and civil penalties, the amounts of which are to be determined by the court. Munson has agreed to an associational bar, preventing him from associating with certain persons in violation of securities laws, with a right to apply for reentry after three years. The SEC acknowledged assistance from the Jersey Financial Services Commission in the investigation.