An Offering Fraud with a Double Hit
Offering frauds typically center on defrauding investors who purchase shares of stock issued by a particular company. Investors are frequently induced to invest their funds in a particular venture through a series of false statements and fraudulent misrepresentations. The Commission’s most recent offering fraud action follows this pattern, but then takes a turn – the person that defrauded the investors also defrauded the issuer. SEC v. Kikrchner, Civil Action No. 4:23-cv-147 (N.D. Tx. Filed February 14, 2023).
Defendant Christopher Kirchner is the co-founder of Slync Inc. and served as the firm’s CEO. Over a period of about 15 months, beginning in January 2020, Defendant raised $67 million for the Company in two rounds of capital fund raising. The first round involved the issuance of Series A Preferred Stock. The second round involved the issuance of Series B Preferred Stock. To market each Series, Defendant used a series of misrepresentations which included false statements about the use of the investor proceeds, the development of the company and its growth.
Following the completion of the second round of financing, Defendant began siphoning off the investor capital. Significant portions of the investor capital were transferred to his personal bank account. Defendant also used firm funds to pay for personal expenses. Overall, Defendant diverted about $28 million of the $67 million raised for the company by defrauding investors. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10b). The case is pending. The U.S. Attorney’s Office for the Northern District of Texas filed parallel criminal charges. See Lit. Rel. No. 25639 (February 14, 2023).