The Securities and Exchange Commission charged three individuals who defrauded investors in a company that falsely claimed to be developing a caffeinated chocolate snack and nearing an acquisition by Monster Energy or Coca-Cola Co.
The SEC’s complaint alleges that Lisa Bershan and her husband, Barry Schwartz, together with business associate Joel Margulies, falsely promised investors that after being acquired, Starship Snack Corp. investors would get a one-to-one exchange of Starship shares for Monster or Coca-Cola shares.
According to the SEC’s complaint, Bershan and Margulies also falsely claimed that investors had “no downside risk,” and Bershan personally guaranteed that investors could get their investment back with 5% interest if the shares failed to appreciate over a year.
According to the SEC’s complaint, Starship had no agreement with Monster Energy or Coca-Cola, and Bershan and Schwartz spent investor funds to rent and decorate a New York City apartment and on travel, meals and other personal expenses.
“As alleged in our complaint, investors trusted Bershan, Schwartz and Margulies, but that trust was misplaced,” said Lara S. Mehraban, associate regional director of the SEC’s New York Regional Office, in a statement. “The defendants constantly reassured their investors with lies, all the while taking their money and spending it on themselves.”
The SEC’s complaint charges Bershan, Margulies and Schwartz with violating antifraud provisions of the federal securities laws and a related SEC antifraud rule. The SEC is seeking to have the defendants return their allegedly ill-gotten gains plus interest, pay penalties, and be subject to permanent injunctions.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against the three defendants.
SEC Charges Attorney With Participating in Ponzi Scheme
The SEC filed fraud charges against an attorney, Marc Celello, based on his alleged participation in a Ponzi scheme.
The SEC’s complaint alleges that Celello — who, along with Canton, Georgia resident James Torchia, was a partner in Credit Nation Capital and served as general counsel for the underlying entities — helped orchestrate a Ponzi scheme involving unregistered promissory notes that falsely promised a 9% return.
Between 2009 and November 2015, when the SEC obtained a court order stopping the alleged Ponzi scheme, Credit Nation Capital raised at least $30 million from investors.
According to the SEC, Celello allegedly prepared offering memoranda and directed sales and marketing representatives to lie to investors that the promissory notes were secure investments “backed by hard assets dollar for dollar.”
The complaint further alleges that Celello knew that Credit Nation Capital was insolvent and directed an employee to fabricate a fraudulent balance sheet that made it appear to be profitable. Celello also allegedly helped transfer investor funds from CN Capital to Torchia for Torchia’s personal use.
The complaint seeks permanent injunctions, an accounting, disgorgement plus interest, and civil penalties.
Lawyers Charged With Assisting a Microcap Fraud Scheme
The SEC charged two lawyers it alleges helped facilitate a microcap fraud scheme involving undisclosed “blank check” companies secretly bound for reverse mergers.