Central District of California | Former Malibu Resident Sentenced to More Than 15 Years in Prison for Conning Investors with Bogus Promises of Discounted Alibaba IPO Shares

LOS ANGELES – A former Malibu resident was sentenced today to 188 months in federal prison for defrauding several individuals out of more than $3 million with bogus claims that he had access to stock shares of Alibaba prior to its initial public offering. 

Frank Harold Rosenthal, 48, formerly of Malibu but most recently of New York City, was sentenced by United States District Judge Fernando L. Aenlle-Rocha, who also ordered him to pay $1,182,500 in restitution. While imposing sentence at today’s hearing, Judge Aenlle-Rocha called Rosenthal an “incorrigible, serial liar.” 

Rosenthal pleaded guilty on June 30 to two counts of wire fraud. He has been in federal custody since that day.

From November 2013 to April 2015, Rosenthal falsely claimed to have inside connections at Goldman Sachs that would provide him with special access to purchase shares of Alibaba, a Chinese e-commerce company, at a discount before its initial public offering.

Rosenthal used a middleman to carry out his scheme, lying to the middleman and pressuring him to solicit funds from his relatives and acquaintances for the purportedly lucrative investment opportunity.

To lend legitimacy to his fraudulent scheme, Rosenthal negotiated and drafted loan agreements and promissory notes with the victims that promised the victims significant returns on their loans and investments.

After obtaining their money, Rosenthal lulled his victims by, among other things, falsely stating that the Alibaba shares he supposedly would purchase with their money were locked up and could not be immediately sold.

Instead of using victims’ funds to purchase shares of Alibaba, Rosenthal used the money to support his lavish lifestyle, which included the $16,000 monthly rent of a Malibu home. To avoid detection and forestall threatened legal action by the victims, Rosenthal used some of the funds received from early victims to pay off later ones in a Ponzi-style arrangement. 

Rosenthal “carefully crafted a ruse to steal money” using “clever inducements” that made it difficult for victims to discover the fraud and insulated [Rosenthal from] having to regularly deal with his victims by abusing the reputation of good character and business judgment of the victims’ trusted friend and relative” to perpetrate the fraud, prosecutors argued in a sentencing memorandum. “[Rosenthal] enhanced the attractiveness of his scheme by making up friends in high places, complete with fake emails, to create the further appearance of exclusivity and success.”

IRS Criminal Investigation investigated this matter.

Assistant United States Attorneys Steven M. Arkow and Mark Aveis of the Major Frauds Section and Trial Attorney Sara E. Henderson of U.S. Department of Justice’s Tax Division prosecuted this case.