In 2016, Daniel Adams, a film writer/director and tax felon, and Michael Flanders, a music producer, were trying to raise money to make a movie, according to the SEC.
But in doing so, the SEC says, they and the two companies they formed defrauded at least two investors.
The SEC charged Adams, Flanders and companies under their control with defrauding two investors in connection with financing a movie entitled “An L.A. Minute.”
The SEC’s complaint alleges that, in 2016, Adams and Flanders induced the two individuals to invest $160,000 through two companies, Spiderworx Media LLC and An L.A. Minute LLC, using a pattern of lies and deception.
According to the complaint, Adams and Flanders falsely stated to one of the investors that they had each invested in the film and would not receive any of the funds being raised until bank financing was obtained.
The complaint further alleges that Adams misrepresented how investor proceeds had previously been spent and fraudulently stated that the money the investor had provided would be used exclusively to pay attorneys.
In reality, Adams and Flanders received $21,062 and $18,500, respectively, from the $60,000 investment, and only $20,000 was paid to an attorney.
The complaint further alleges that Adams and Flanders also made misrepresentations to the second investor, who said he would invest $100,000 only if $200,000 was first raised elsewhere.
According to the complaint, Flanders forwarded the investor two fabricated emails Adams had prepared containing a fictitious wire transfer confirmation and a forged signature page, to create the false appearance that $200,000 had been raised from another investor.
The complaint alleges that Adams and Flanders personally received $29,000 and $10,000, respectively, from the $100,000 investment.
In 2012, Adams pleaded guilty to tax fraud and larceny was ordered to pay nearly $4.4 million in restitution to the state of Massachusetts, and served a 21-month prison term.
The complaint seeks injunctive relief, including a conduct-based injunction prohibiting Adams from participating in any unregistered securities transactions, disgorgement of ill-gotten gains plus prejudgment interest by Adams and Flanders, and penalties against all the defendants.
SEC Halts $3.6M Alt Investments Scheme Targeting Retail Investors
The Securities and Exchange Commission announced fraud charges and an asset freeze against the operators of a South Florida-based investment fund scheme, one of whom has a prior felony conviction and is on parole after nearly 20 years in prison.
The SEC filed an emergency action in federal district court against Castleberry Financial Services Group LLC President T. Jonathon Turner, formerly known as Jon Barri Brothers, and CEO Norman Strell, alleging that they have defrauded at least 15 investors out of $3.6 million since February 2018.
According to the SEC’s complaint, Castleberry falsely represented to investors it had hundreds of millions of dollars in capital invested in local businesses and a portfolio of hundreds of investment properties. “In truth, Castleberry never had millions of dollars invested in businesses or real estate and never derived significant revenue from investments,” the complaint states.
Castleberry claimed to offer high yields while protecting investors’ principal by having it “fully insured and bonded” by CNA Financial Corp. and Chubb Group, when the insurance companies had no relationship with Castleberry and did not authorize it to use their logos in Castleberry’s sales materials.
According to the SEC, Turner and Strell diverted and misappropriated significant sums of investor funds through cash withdrawals, payments for personal expenditures, and bank transfers to personal bank accounts and other funds to businesses they controlled and to family members.