When Facebook Inc. announced its plan for an initial public offering in 2011, irrational exuberance for the stock of the social media website was an understatement.

Gignesh Movalia tapped into the consensus that Facebook’s $16 billion stock offering—one of the largest IPOs ever—would be easy money and attracted more than 300 investors around the country to invest in his Tampa-based OM Global Investment Fund LLC, an unregistered hedge fund.