The Securities and Exchange Commission has charged the owner of a film distribution company for running a scheme to misappropriate nearly $14 million from the BlackRock Multi-Sector Income Trust (BIT) through a sham company and forged signatures.
The SEC alleged Friday that BIT, a registered closed-end management investment company, invested about $75 million in Aviron Group, a film distribution company founded, owned and operated by William Sadleir. Sadlier financed the venture via two notes, which were securities issued in 2015 and 2017, respectively.
In 2017, Sadleir fraudulently diverted more than $25 million to the entity he owned and “falsely represented to BIT that the sham company was affiliated with a legitimate media company performing work to market and promote Aviron’s business,” the complaint states.
The complaint also alleges that Sadleir represented that the investments would be used to support the company’s distribution of films.
Sadlier, founder and chairman of indie distributor Aviron Pictures, was ousted by the fledgling company’s financier, two insiders familiar with his exit told Variety in January.
Details on the Scam, Spending
“Contrary to these representations, Sadleir allegedly used a sham company as a vehicle to fraudulently divert and misappropriate BIT funds and issued fake invoices seeking BIT funds for services that were never provided,” the complaint states.
Sadleir also misappropriated for his personal use at least $13.8 million of BIT’s invested funds, including cash withdrawals, buying a luxury car and a mansion in Beverly Hills, California.
In 2019, Sadleir forged BIT personnel signatures to authorize the release of collateral BIT valued at some $3 million, which had been secured to protect interest in the notes, the complaint states.
“When private companies and individuals solicit or accept investments, including from investment companies, they must comply with the federal securities laws,” said Adam Aderton, co-chief of the Enforcement Division’s Asset Management Unit, in a statement.
“We allege that Sadleir raided millions from BIT and its investors, and rather than using those funds for investment purposes he spent them lavishly on himself,” Aderton explained.
The SEC’s complaint, filed in federal court in Manhattan, charges Sadleir with violating the anti-fraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains, civil penalties and permanent injunctive relief.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today filed criminal charges against Sadleir.