Florida Man who Used COVID-Relief Funds to Purchase Lamborghini Sports Car Charged in Miami Federal Court (DOJ Release)Venture Investors Double Their Bets on Faux Meat Startups / Early stage investors back over 20 alternative protein startups with hopes of finding the next Beyond Meat.(Bloomberg by Emily Chasan)
What made matters potentially worse were a series of text messages allegedly from Doench to the client that included language such as "lol" and "hahaha" when referring to the IRA. McCaigue listed a handful of these text messages in a suit filed . . .
[H]ines sought approximately $13.5 million in PPP loans through applications to an insured financial institution on behalf of different companies. The complaint alleges that Hines caused to be submitted fraudulent loan applications that made numerous false and misleading statements about the companies' respective payroll expenses. The financial institution approved and funded approximately $3.9 million in loans.The complaint further alleges that within days of receiving the PPP funds, Hines purchased a 2020 Lamborghini Huracan sports car for approximately $318,000, which he registered jointly in his name and the name of one of his companies. In the days and weeks following the disbursement of PPP funds, the complaint alleges that Hines did not make payroll payments that he claimed on his loan applications. He did, however, make purchases at luxury retailers and resorts in Miami Beach.
The venture investors backing this space range from companies like Cargill Inc. and General Mills Inc. to pension funds, traditional venture capital firms and celebrities like Bill Gates and Oprah Winfrey. As a group, they are betting that faux meat and dairy can scale up production quickly to meet a new generation of climate-conscious eaters that want to reduce the impact of livestock on the planet, according to Marisa Drew, head of the impact advisory and finance group at Credit Suisse Group AG. Plant-based and cell-based meat require a fraction of the water and energy used to manage livestock, but companies also have to invest heavily in marketing and technology to help replicate the look of a hamburger or the texture of seafood.
Advanced Wellness was the "exclusive distributor" of medical devices referred to as WellnessTech Systems. Advanced Wellness and Johnson touted WellnessTech Systems, claiming they are "the most advanced early screening system for use by Primary Care physicians." The WellnessTech Systems purportedly permitted physicians to test patients of critical risk factors in a "10-minute, non-invasive test." Johnson claimed physicians would test patients for these critical risk factors during annual appointments.Advanced Wellness and Johnson began offering investments in the WellnessTech Systems to Texas residents. They were afforded the opportunity to invest $50,000 in the scheme. After purchasing an investment, Johnson claimed the WellnessTech Systems would be placed with physicians, and the physicians would be trained to use the products to test their patients. Investors were passive and not responsible for managing or servicing the WellnessTech Systems or billing for their use.The pitch promised lucrative returns. Johnson promised investors a return of 20 percent of their investment per year over a term of two years, paid on a monthly basis. He also promised Advanced Wellness would pay $5.00 to investors whenever a physician used the WellnessTech System to test a patient and predicted the aggregate payment of these returns could yield an additional profit of $15,000 to $18,000 per year over a term of five years.The Enforcement Division began investigating the scheme and determined that Advanced Wellness and Johnson were engaging in an illegal securities offering. The Enforcement Division directed Johnson to cease and desist offering the investment. Johnson thereafter promised to cease and desist offering the investments. His promise was a sham. On the same day Respondent Johnson met with the Enforcement Division, Advanced Wellness and Johnson again illegally offered investments in the WellnessTech System. Commissioner Iles then entered an emergency cease and desist order to stop the scheme.Johnson concealed significant information from potential investors, including information relating to the considerable risks associated with the WellnessTech Systems and the ability of Respondent Advanced Wellness to actually satisfy its promised payment of returns.
During a sales practice examination of JKR, FINRA staff discovered that between November 2012 and December 2016 (the "relevant period"), JKR failed to detect red flags of suspicious activity in four related accounts. These red flags included: common ownership of multiple accounts without an apparent business purpose for multiple accounts; one account owner with significant disciplinary history related to securities fraud; potentially manipulative trading activity, unusual transfer activity between related accounts that was inconsistent with expected activity in such accounts and without an apparent business purpose; and unexplained third-party wire transfers that were inconsistent with expected account activity. By failing to detect these red flags, investigate them, and report the activities as required, the firm violated FINRA Rules 3310(a) and 2010.
In early 2018, Enterprise became the placement agent for the TMGH offering, through which the issuer sought to raise $15 million for investment in two separate university housing complexes. At this time, Enterprise operated with a $5,000 minimum net capital requirement. The private placement memorandum ("PPM") for the TMGH offering was dated February 15, 2018, and required that a minimum of $4 million in investor funds be raised by March 10, 2018. The PPM further provided that, if the $4 million minimum amount was not raised as of that specified date, all funds would be returned to investors without interest or deduction.Enterprise began raising funds shortly after the commencement of the offering. When Enterprise received those funds, the Firm immediately transferred them to an account controlled directly by TMGH rather than to a bank acting as the escrow agent. By the March 10, 2018 date specified in the PPM, Enterprise had only raised approximately $1 million, short of the $4 million minimum contingency required by the PPM. Enterprise did not return investor funds at that time, but rather continued to solicit investors for the TMGH offering. By June 7, 2018, Enterprise had raised an additional $4 million of investor funds for that offering.
Respondent Enterprise attached to the AWC the following "Corrective Action Statement," which in part states [Ed: footnotes omitted]:The Firm understands that this settlement includes a finding that it willfully violated SEA Rule 10b-9 of the Securities Exchange Act of 1934 and that under Article III, Section 4 of FINRA's By-Laws,this makes the Firm subject to a statutory disqualification with respect to membership.
The Enterprise Securities Company ("TESC") submits this Statement of Corrective Action (this "Statement") with the foregoing Letter of Acceptance, Waiver and Consent ("AWC") to describe the steps it has taken during the review period and since the review to correct and substantially reduce the risk of issues identified in the AWC from occurring. This Statement does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA, or its staff. The AWC relates to a direct placement of securities in a "best efforts contingency offering" between February and June of 2018. TESC failed to deposit investor funds into an escrow account and failed to return investor funds after the minimum contingency was not met.CORRECTIVE ACTIONThe offering at issue stated that the securities, "...[were] being sold on a reasonable 'best efforts' basis...." The investor funds were deposited directly into the Issuer's account. The offering documents stated that if the Issuer did not raise a minimum amount by the closing date set forth therein, the investor funds would be returned. TESC has set up the following internal controls and procedures on all future direct placements:Offering Exempt from Registration (Contingency Offering Review).Prior to the submission of any private placement offering to FINRA pursuant to its obligations under Rule 5123, the company shall submit the offering documents to its counsel or outside compliance agency to assess whether the offering constitutes a contingency offering under SEA Rule 15c2-4 (a "Contingency Offering"). If the company concludes that the offering is a Contingency Offering, and that it will receive money or consideration from an investor in a contingency offering, then the company must promptly transmit those funds to a bank that has agreed in writing to act as the escrow agent for the offering. SEC staff has interpreted "promptly" to mean by noon of the next business day. The company's responsibility does not end when it promptly transmits funds to an escrow agent. A company must also promptly refund investors' funds if the contingency is not met.Offering Exempt from Registration (Termination Date).The company shall document the termination date of any private placement offering (the "Termination Date"). One week prior to the Termination Date, the company shall provide written notice to the Issuer requesting either (a) confirmation that the Termination Date is to be extended pursuant to resolution of its members, manager, partners, board or officers, as the same is required under the governance documents of the Issuer, and if so, the extended Termination Date, or (b) confirmation that the offering is to be terminated by the Termination Date without extension. In the event of the occurrence under subsection (b), the company shall terminate all sales of the offering at issue, and advise any prospective investors of the Termination Date, advising the prospective investors that the company shall not accept any investor funds or subscription documents after the Termination Date, and that any pending subscription documents shall be terminated effective as of the Termination Date. The failure of the company to receive confirmation from the Issuer shall constitute an event under subsection (b), above.TESC may amend these policies and procedures in the usual course of its operations. Please feel free to contact me if you have any questions regarding the corrective action taken herein. . . .
Respondents in a settled disciplinary action may submit a Corrective Action Statement and/or a Mitigation Statement to NASD Regulation. This article clarifies the NASD policies regarding such Statements.A Letter of Acceptance, Waiver and Consent (AWC) permits a respondent in an NASD Regulation disciplinary action to settle the matter prior to the filing of a formal complaint. A Corrective Action Statement may be attached to the AWC, which is filed with the SEC and available to the public, provided such statement is: (1) limited to demonstrable steps taken to correct a problem associated with the disciplinary action; (2) generally no longer than 2-3 pages; and (3) contains the following legend:This Corrective Action Statement is submitted by the Respondent. It does not constitute factual or legal findings by NASD Regulation, Inc., nor does it reflect the views of NASD Regulation, Inc., or its staff.Separately, respondents may submit a Mitigation Statement for consideration by NASD Regulation and the National Adjudicatory Council. Generally, such Statements are used to describe mitigating circumstances surrounding the violation for the decision maker to consider in its review of the terms of a settlement. Unlike Corrective Action Statements, Mitigation Statements are not attached to the AWC or public order.Respondents may also settle a matter after the complaint is filed by submitting an Offer of Settlement. While both Corrective Action and Mitigation Statements may be submitted to NASD Regulation in connection with Offers of Settlements, these Statements are not attached to the final Order Accepting the Offer of Settlement, which is filed with the SEC and available to the public.NASD Regulation will not accept Corrective Action or Mitigation Statements that deny the allegations or are inconsistent with the findings in the settlement. . .