SEC accuses defendants of engaging in $6 million fraudulent offering scheme

Securities SEC Enforcement Courts

On December 7, the SEC filed a complaint against a venture capital firm and its co-founder and CEO (collectively, “defendants”) for allegedly making fraudulent offers and sales of purported shares of sought-after pre-IPO companies. According to the SEC, the defendants did not own the shares at the time of the solicitations and never acquired them. Instead of purchasing the securities, the SEC alleged that the CEO used the investor funds for personal use and created fraudulent documentation and statements to deceive investors. The SEC also alleged that the CEO’s other co-founder “performed important tasks with respect to the company including opening business bank accounts, completing paperwork necessary to form the business, and other administrative tasks,” and encountered, but failed, to act upon sufficient red flags regarding the company’s operations. The SEC’s complaint alleged violations of antifraud provisions of the federal securities laws and is seeking permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties against the defendants.