$8.7 million, 35 investors, one word: veterans
A fund claimed 153% returns while losing money, and veterans’ trust was the collateral.
By The Ledger · · 5 min read
Two men raised $8.7 million from 35 investors by promising a 153% return that never existed. The Securities and Exchange Commission says the fund was losing money the entire time, and the pitch worked because one of the defendants was a former naval officer selling to other veterans.
The number that matters is $8.7 million from 35 investors. That works out to roughly $249,000 per investor, concentrated enough to suggest these weren't casual retail bets but serious allocations from people who trusted the pitch. The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, names Christopher Kenji Dinelli and Jacob David "Kobe" Frankel as the operators behind a fund called Beyond Alpha Ventures LLC and an advisory firm, Beyond Equity LLC.
The 153% figure came from a document, not a trade
According to the SEC, the defendants circulated a "Trading Fund Overview 2024" that claimed a 153% net return on investment. The complaint alleges this number was fiction. The fund's actual performance, per the SEC, was consistent losses, driven by failed options trades. The gap between the claimed 153% gain and the real trajectory is the entire scheme in one comparison: a document asserting success printed over a ledger showing the opposite.
Dinelli allegedly told investors their money would go into an options trading strategy, or into special purpose vehicles holding pre-IPO shares in two private companies. Those SPVs are the second half of the pitch, and arguably the more dangerous one, because pre-IPO stakes are nearly impossible for an outside investor to verify. There's no public price, no quarterly filing, nothing to check the claim against except the word of the person making it.
Why $8.7 million sounds smaller than what it bought
$8.7 million is a modest sum by the standards of securities fraud cases the SEC brings in a given year. But the number understates the scheme's reach because of who the 35 investors were. The complaint says Dinelli targeted veterans and people who provide medical services to veterans — a population selected not for wealth but for a shared bond that lowered their guard.
Thomas P. Smith, Jr., associate director of the SEC's New York Regional Office, framed it this way: the bonds between service members are as strong as in any profession, and the defendants allegedly used those bonds for personal gain. That's the mechanism worth naming plainly. Affinity fraud doesn't need a bigger number to do more damage; it needs a smaller, more trusting pool, because due diligence inside a trusted community is often weaker than due diligence between strangers.
The complaint alleges the defendants misrepresented more than the headline return. They allegedly inflated assets under management, invented or exaggerated BAV's client base, and misstated current and past holdings. Each of those claims, on its own, is a smaller lie than 153% — but together they built a fund that looked institutional when the underlying activity, per the SEC, was failing options trades and personal withdrawals.
Where the pre-IPO money actually went
This is the detail that separates the scheme from ordinary bad trading. The SEC alleges that money investors believed was going into pre-IPO securities was instead diverted into the fund's brokerage accounts — the same accounts where options trades were losing money. Investors who thought they held a stake in a private company before it went public were, per the complaint, exposed to options losses they never agreed to.
On top of that, the complaint alleges Dinelli personally misappropriated more than $1 million, and Frankel more than $340,000. Combined, that's roughly 15% of the total $8.7 million raised, taken directly rather than lost to trading. The rest, the SEC alleges, mostly disappeared into the brokerage losses the investors were never told about.
The counter-argument the defense will likely make
Taken seriously, the strongest defense available here is that options trading is volatile by nature, and that a fund manager touting a strong year isn't automatically guilty of fraud — overconfidence and bad timing happen to legitimate funds too. If Dinelli and Frankel genuinely believed, at some point, that a turnaround was coming, the 153% figure could be argued as aspirational marketing rather than deliberate fabrication.
That argument gets harder to sustain against the specific allegations in the complaint: that the return claim appeared in a formal document, that losses were described by the SEC as consistent rather than occasional, and that money was allegedly diverted without investor knowledge into accounts separate from where they believed it was held. A single bad year is a risk disclosure problem. A diversion of pre-IPO money into undisclosed options accounts, combined with over $1.3 million in alleged personal withdrawals, is a different category of conduct — one the complaint treats as deliberate.
Two courts, one set of facts, two different penalties
The SEC's complaint charges both men with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Frankel faces an additional charge under the Investment Advisers Act of 1940, reflecting his role at Beyond Equity LLC, the registered advisory arm. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil penalties — financial remedies, not prison time.
Separately, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against both men this week, covering the same underlying conduct. That parallel track carries the possibility of prison sentences, which the civil case does not. The two proceedings will run alongside each other, with the civil case aimed at recovering money and the criminal case aimed at punishment.
Disgorgement, if ordered, would require Dinelli and Frankel to return money they allegedly took, plus interest calculated from when it was taken. But disgorgement only works if the money still exists somewhere — in accounts, property, or other assets. For the 35 investors who put in an average of roughly a quarter-million dollars each, the SEC's civil penalties and any eventual criminal restitution are the only paths back to what they handed over. Whether that money is still there to collect is the open question the case hasn't yet answered. For now, the investors who trusted a fellow veteran's fund are the ones carrying the loss while two federal cases work through what, if anything, can be returned.