Flashy Salesman Raises Millions in Offering Fraud

Offering frauds are typically one of the largest types of cases filed by the Commission. These frauds come in all sizes, shapes and colors – there is virtually an infinite variety of these types of cases. While the Commission almost continuously files new audit fraud cases, often with a parallel criminal case filed by the appropriate U.S. Attorney’s office, they continue to persist. In some instances, this is because the sales pitch is good and offers something which is difficult to achieve, a quick way to become rich. In others, the scheme is as simple as an offer to sell shares of a company by a good salesman. This was the method used in the latest offering fraud case filed by the Commission, SEC v. Pison Stream Solutions, Inc., Civil Action No. 1:24-cv-00816 (N.D. Oh. Filed May 7, 2024).

Named as defendants are the company and Joseph James, Jr. Defendant James is a resident of Bratenahl, Ohio, a wealthy enclave in Cleveland, Ohio. He formed Defendant Pison Stream and has served as its CEO since inception. Prior to Pison, Mr. James worked as a chemist for various companies. The company, based in Broadview Heights, Ohio, a suburb of Cleveland, engages in researching and developing products in the chemical coatings industry.

Over a five-year period, beginning in 2017 Defendants James and Pison raised about $32.5 million by selling the securities of the company. Investors were told that their funds would be used for the development of Pison and its business and expanding its chemical coatings operations.

In dealing with investors Mr. James presented himself as an independently wealth investor – he did not need their money. He did not take a salary from the company for all of his work, apparently part of the sales pitch. This approach, coupled with the opulent life style of Mr. James apparently convinced investors that he was the real thing – a promotor of the company and its business who did not need the money for himself.

The image Defendant James created was bolstered by relocating the headquarters of Pison from suburban Cleveland to Manhattan and One World Trade Center in 2019. Mr. James finished off his image by maintaining an expensive Manhattan apartment for his personal use.

Unfortunately, the company never moved past being a start-up. Its only recognized income for the period was $6,800 — a testament to its lack of success. The company also did not appear to benefit from the millions of dollars raised by selling its securities. Mr. James, however, did. Over $10 million of those funds were used to create the successful lifestyle Defendant James used to create the image that helped sell Pison’s securities. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation . See Lit. Rel. No. 25999 (May 8, 2024).