← Broker database 2026-03-17
FINRA Charges Spartan Capital Securities and Principals with Defrauding Customers in IPO Share Scheme
According to FINRA, Spartan Capital Securities, LLC (CRD #146251) of New York, New York, together with CEO John Dennis Lowry (CRD #4336146) and CCO Kim Marie Monchik (CRD #2528972), are accused of engaging in a scheme to defraud firm customers by failing to disclose — and materially misleading customers regarding — their ability to resell restricted pre-IPO shares.
The complaint alleges that the firm, Lowry, and Monchik engaged in this scheme in order to allow the firm and selected employees to use the "deemed owned" exception to liquidate their own similarly restricted shares shortly after an IPO commenced on June 15, 2021. Firm customers who owned pre-IPO shares were not informed of the resale restriction removal process until a June 23, 2021 notification — eight days after the IPO commenced. The complaint alleges this delay was deliberate, designed to keep customers unaware that firm principals and employees were already selling their own shares. By the time customers were able to sell, the share price had fallen dramatically. The firm and its employees made over $50 million in profits from their sales while customers were left holding devalued shares.
The complaint further alleges that the firm received unreasonable and undisclosed underwriting compensation. The firm failed to include $475,000 in cash and 500,000 shares paid by the issuer in compensation disclosures to FINRA and in public filings, rendering the total undisclosed compensation unreasonable in violation of FINRA rules.
Because these are allegations in an unadjudicated complaint, no findings have been made. However, the alleged conduct — using information asymmetry and deliberately timed communications to allow insiders to profit at customers' expense — represents a serious alleged breach of fiduciary duty and securities law.
Investors in pre-IPO placements should carefully review all terms governing resale restrictions and should ask directly about the ability of the firm and its employees to sell their own shares during the same period.