A hedge fund sold fake pre-IPO Uber shares then blew the money on strip clubs and sports, claims SEC

Investors are clamoring for a piece of Uber, but one group stands accused of capitalizing on it in the wrong way.

A hedge fund stands accused by the SEC and the DOJ of selling investors fake pre-IPO shares of Uber, Airbnb, and Alibaba before blowing the money on an elaborate lifestyle, according to the complaint.

On May 31, the Department of Justice charged JSG Capital Investments' CEO and founder Jason Gill, who also goes by the name Jaswant Singh Gill, and his colleague Javier Carlos Rios for allegedly raising more than $9 million in investor funds and then diverting or stealing more than millions of it, according to the SEC, which assisted in the case.

That money went to fund an elaborate lifestyle, including trips to Vegas, visits to "gentlemen's clubs" and attending professional sporting events, the complaint said.

Along the way, Gill and Rios did repay small amounts to earlier investors using new investor money as "interest payments" to not arouse suspicion, "in a manner that was consistent with a classic Ponzi scheme," the DOJ stated. However, there's no evidence that the group ever purchased any pre-IPO shares of any tech company, including Uber, according to the DOJ.

Ride-hailing company Uber is one of the most valuable private companies, but it is notorious for having tight controls over its shares and it dislikes unauthorized shares being on the market. Other funds that have tried to create groups to purchase as much as $10 million in preferred shares in Uber's latest round have decided not to go down that path citing a lack of investor interest, according to a Bloomberg report.