Two California men have been charged with pocketing millions of dollars from investors who thought they were going to get 60 percent returns for investing in hot pre-IPO stocks, the Securities and Exchange Commission announced Monday.

Jaswant (Jason) Gill of San Diego, Javier Rios of National City and their company, JSG Capital Investment LLC, are charged with operating a classic Ponzi scheme that used new investor money to pay off old investors, the SEC says. The SEC has obtained an asset freeze against the three.

Gill and Rios also face criminal charges of wire fraud and conspiracy to commit wire fraud filed by the U.S. Attorney for the Northern District of California.

The defendants allegedly specialized in serving middle-class investors, who were promised deals “previously only available to the 1 percenters.”  The SEC alleges that instead of using the firm's purported proprietary trading models and investing in pre-IPO shares of well-known tech companies like Uber, Alibaba and Airbnb as promised to investors, Gill and Rios personally pocketed at least $2.8 million of the approximately $10 million they raised. The U.S. Attorney’s office sets the amount ”fraudulently diverted and stolen” even higher at $5.5 million.

They used some of that money to pay for excursions to high-end restaurants and luxury retail stores as well as jaunts to Las Vegas casinos, gentlemen's clubs and professional sporting events, the complaint says. They never actually invested in any pre-IPO shares, and have been using money from new investors to pay supposed returns to earlier investors, says the SEC.

According to the SEC's complaint filed in federal court in San Francisco, Gill in particular brandished phony credentials, telling investors he founded his firm after serving as a managing director at Morgan Stanley. He also boasted of partnerships with several Silicon Valley venture capital firms. Gill, Rios, and JSG Capital Investments are not registered with the SEC or any state regulator. Rios's background is in food service.

The SEC notes that investors can check the credentials of people selling investments to determine if they are registered by going to the SEC website at www.investor.gov. In the past, the agency also has warned that pre-IPO offerings should be investigated before any investments are made.