Are the sellers selling pre-IPO shares over these websites legitimate or fake?

Question

The websites which are selling block of Facebook,Twitter and other companies are given below with the explanation which I think is fake and is not legitimate.However I have contacted both of the firms to buy block of Facebook shares which are on boom and as these shares are entering quiet period after 18 days from now that is on or before 15 april .So they have sent Letter of Intent and now I feel that I should not buy the shares of IPOtrust.com,however I have serious doubts on privatestocktransfer.com

*Please do the needful,put up all those things which are important here.*And good luck to all those who want to invest in.

IPOTrust.com- The founder of this venture started this venture IPOtrust.com in 2009,when i searched IPOtrust on google I found the links of facebook,twitter.The updates on the facebook,twitter from IPOtrust are no more older than 4 months.Moreover the layout and design is good but I felt fake.The updates from IPtrust on facebook,twitterline seems fake also.

privatestocktransfer.com-Same is the case here as explained with IPOtrust.com

Answer 1

I think you're right that these sites look so unprofessional that they aren't likely to be legitimate.

However, even a very legitimate-looking site might be a fake designed to separate you from your money. There is an entire underground industry devoted to this kind of fakery and some of them are adept at what they do. So how can you tell?

One place that you can consult is FINRA's BrokerCheck online service. This might be the first of many checks you should undertake.

Who is FINRA, you might ask? "The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States." See here.

My unprofessional guess is, even if a firm's line of business is to broker deals in private company shares, that if they're located in the U.S. or else dealing in U.S. securities then they'd still need to be registered with FINRA – note the "all securities firms" above.

I was able to search BrokerCheck and find SecondMarket (the firm @duffbeer703 mentioned) listed as "Active" in the FINRA database. The entry also provides some information about the firm. For instance, SecondMarket appears to also be registered with the S.E.C..

You should also note that SecondMarket links back to these authorities (refer to the footer of their site): "Member FINRA | MSRB | SIPC. Registered with the SEC as an alternative trading system for trading in private company shares. SEC 606 Info [...]" Any legitimate broker would want you to look them up with the authorities if you're unsure about their legitimacy.

However, to undertake any such kind of deal, I'd still suggest more due diligence. An accredited investor with serious money to invest ought to, if they are not already experts themselves on these things, hire a professional who is expert to provide counsel, help navigate the system, and avoid the frauds.

Answer 2

You cannot trade in pre-IPO shares of companies like Facebook without being an accredited investor. If a website or company doesn't mention that requirement, they are a scam.

A legitimate market for private shares is SecondMarket.