Financial Markets

A 23-year-old New Jersey man faced fraud charges Tuesday after authorities said he bilked investors out of thousands they believed was buying shares of big-name initial public offerings on Wall Street. (Bebeto Matthews | AP Photo)

NEWARK--When GoDaddy went public in April, shares in the company known for its racy Super Bowl ads soared in price, closing at more than 30 percent above the initial offering.

Omar Hafez, head of a company called Lotus Global Entities, claimed to have an inside track on the expected high-flying IPO and told an investor he could get in on the offering price, say federal prosecutors. Soon afterward, he allegedly received a wire for approximately $300,000 to purchase shares.

The money did not go into the IPO, said the FBI. About $87,000 of it went into the purchase of a luxury car from Prestige Motors. Another $100,000 was pulled out in cash withdrawals. And on Tuesday, Hafez, 23, of North Arlington, was in federal court in Newark facing charges of conspiracy to commit wire fraud.

According to U.S. Attorney Paul Fishman, Hafez created a chain of companies that solicited thousands of dollars from investors looking to put money into a number of high-profile IPOs. The money went instead into his pocket, say authorities.

In court filings, the FBI said Hafez never registered with the Financial Industry Regulatory Authority, and could not legally sell securities to the public. But as far back as July 2014, they said he was telling investors he could make them rich.

While the complaint against Hafez did not identify specific IPOs, it cited the public offering of an "internet domain registrar and web hosting company" that was widely covered by the media when it opened on Wall Street on April 1. That was the day that GoDaddy, the world's largest web hosting company, went public in a highly anticipated sale.

A second company cited in the complaint was described only as a cloud communications company that allowed software developers to integrate voice, text, and other communications services into mobile and web applications. Articles about an expected IPO were published by newspapers earlier this year, said prosecutors, and Hafez allegedly told an investor that he had access to shares that would generated "significant profits." The investor sent him $100,000.

If convicted, Hafez faces up to 20 years in prison and a $250,000 fine.

Ted Sherman may be reached at tsherman@njadvancemedia.com. Follow him on Twitter @TedShermanSL. Find NJ.com on Facebook.