Former Malibu man gets 188-month sentence in $3M pre-IPO tech investment scheme

LOS ANGELES — A former Malibu resident was sentenced Thursday to nearly 16 years in prison for defrauding several people out of more than $3 million with bogus claims he had access to stock shares of Alibaba prior to its initial public offering.

Frank Rosenthal, 48, pleaded guilty in July in downtown Los Angeles to two federal counts of wire fraud.

U.S. District Judge Fernando Aenlle-Rocha ordered restitution of $1.18 million along with the 188-month federal prison sentence, according to the U.S. Department of Justice.

Rosenthal admitted making false claims of having inside connections at Goldman Sachs that would provide him with special access to purchase discounted shares of the Chinese e-commerce company Alibaba before its initial public offering.

The defendant carried out his scheme through a middleman, David Kunkle, by making fraudulent representations and pressuring Kunkle to solicit funds from his relatives and acquaintances for the purportedly lucrative investment opportunity, according to Rosenthal’s plea agreement filed in Los Angeles federal court.

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, court papers show.

The DOJ said that after obtaining their money, Rosenthal lulled his victims by, among other ways, falsely stating that Alibaba shares had been purchased and sold. Rosenthal paid his earlier victims with money from later victims’ funds.

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.