A $237 million fraud suit is rocking Miami’s 777 Partners, as the SEC accuses top executives of deceiving institutional investors and siphoning millions for themselves.
Federal regulators have filed a complaint in Manhattan federal court against Joshua Wander, Steven Pasko, Damien Alfalla, and their companies, 777 Partners LLC and 600 Partners LLC. The Securities and Exchange Commission alleges that, between January 2021 and May 2024, these executives fraudulently solicited investments in a preferred equity offering. According to the SEC, the offering, jointly issued by 777 Partners and 600 Partners, raised approximately $237 million from 13 investors.
The SEC’s complaint states that Wander and Pasko, co-founders and managers of the issuers, and Alfalla, the CFO, managed the issuers as a unified business and reported their financial statements on a consolidated and combined basis. The SEC alleges that the defendants misled investors about the issuers’ financial condition and induced investments 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. According to the complaint, Wander and Alfalla knew or recklessly disregarded, and Pasko knew or should have known, that the issuers were in a severe and worsening liquidity crisis and had no realistic prospects of earning net income sufficient to pay the dividend.
Central to the SEC’s allegations is the misuse and resulting $300 million overdraw of a credit facility. The borrowers under the credit facility were subsidiaries of SuttonPark Capital LLC, which was 600 Partners’ largest subsidiary and the largest operating company within the issuers’ business. The complaint states that by diverting cash and other collateral from the credit facility, the issuers compromised SuttonPark’s ability to generate profits and, in turn, their own financial health. The misuse and overdraw were concealed from the credit facility lender.
The SEC alleges that Wander directed the misuse of the credit facility and the concealment of the overdraw from the lender, with Alfalla helping carry out these activities. Pasko, who was also the CEO of SuttonPark, is alleged to have signed credit facility compliance reports for transmission to the lender without verifying their accuracy or completeness, despite knowing or having reason to know of the overdraw. The complaint states that such reports were false and misleading.
The complaint further alleges that Wander and Alfalla made false and misleading representations about the issuers’ prospects and ability to pay dividends while concealing the $300 million overdraw from investors. Alfalla drafted slides used in an investor presentation and related diligence materials, which falsely represented that the issuers anticipated they would continue to earn substantial positive net income. Wander reviewed and approved these materials before they were sent to investors and participated in calls with prospective investors in which he reinforced the positive picture of the issuers’ prospects.
The SEC claims that Wander also misled investors about how the offering proceeds would be used, representing that they would be used for general corporate purposes. In fact, the complaint alleges that Wander intended to, and ultimately did, cause the issuers to divert approximately $33 million of investor funds to himself and Pasko personally. Specifically, on September 21, 2021, after receiving offering proceeds, the issuers sent approximately $24,914,722.13 to Wander’s personal bank account and approximately $8,028,681.54 to Pasko’s personal brokerage account.
The complaint states that the issuers never remedied the overdraw of the credit facility and that their financial condition continued to worsen. The credit facility lender eventually discovered the misuse and overdraw and commenced litigation. In 2024, Wander, Pasko, and Alfalla resigned from their roles at 777 Partners and 600 Partners and their subsidiaries, and a restructuring adviser was engaged to manage the issuers. The SEC alleges that investors in the offering have suffered substantial pecuniary harm as a result of the defendants’ actions.
The SEC seeks a final judgment permanently enjoining the defendants from violating federal securities laws, ordering disgorgement of ill-gotten gains, civil money penalties, and permanent prohibitions on serving as officers or directors of public companies. The SEC also seeks to permanently prohibit Wander, Pasko, and Alfalla from participating in the issuance, purchase, offer, or sale of any security, except for their own personal accounts. The case is ongoing, and the allegations have yet to be proven in court.
No investor losses? The SEC can still claw back every dollar of pro
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