SpaceX SPV fraud: investors thought they held shares worth $300K — they'd been sold years earlier

SpaceX SPV Fraud: $300K Expected Windfall Evaporates

Ruby Reddy wired $17,250 to Late Stage Management in November 2020 to buy into a fund holding SpaceX shares. The firm's account statements told him the investment was still there. At SpaceX's June IPO valuation of $1.7 trillion, Reddy believed his holdings—based on the portal showing 2,500 share equivalents at the IPO price—were worth over $300,000. It was supposed to fund college for his two kids. Then Late Stage told him the shares had been sold in 2024 at $105 each, before a five-to-one stock split, when they were worth around $45,450.

Reddy received that sale proceeds. But the disconnect is stark: his investment portal and 2025 tax documents showed he still held the shares up until May 2026, weeks before the IPO. He and at least three other investors who spoke to the Wall Street Journal couldn't log into Late Stage's web portal shortly after the IPO. A group chat among roughly 150 Late Stage investors suggests more than 100 others face the same situation—sold shares they thought they still owned, shown monthly account statements as evidence they didn't.

The SpaceX dispute sits outside the criminal case already brought against Late Stage, but it lands as the firm faces mounting allegations. In February and March, three sales executives connected to Late Stage pleaded guilty to federal charges tied to a $528 million investment scheme. Prosecutors said the defendants marketed supposedly fee-free pre-IPO investments while secretly adding upfront markups of 10 to 100 percent, diverting roughly $88 million. Two face up to 45 years in prison; the third faces up to 20 years. Late Stage is also the subject of a class action lawsuit alleging it and associated sales agents misled investors about fees, commissions, and pricing.

The mechanism of the fraud in the SpaceX case appears to hinge on deception rather than just opaque pricing. Investors received quarterly statements saying they held shares that had already been sold without their knowledge or consent. One investor described meeting a sales manager only over WhatsApp, never in person. The firm itself appears to have known which shares had been sold and when—it had documentation—yet continued sending account statements to investors suggesting they still held positions.

The timing matters. Thursday marks the first unlock for pre-IPO SpaceX investors under lockup agreements. Bankers estimate around 900 million shares become eligible for sale. Reddy filed a complaint with the SEC. Some investors have hired lawyers to recover their pre-IPO holdings. The question now is whether other investors will face the same shock when they try to sell, or whether their shares actually exist.