Investing in Multiple Schemes
Investing in Multiple Schemes
Offering fraud actions are one of the largest groups of cases brought by the Commission. The cases are based on a variety of schemes. The schemes can range from selling interest in virtually any type of fund. Examples include IPO funds, cannabis funds and even tickets to Broadway shows. The key is typically to find something investors want and promise to deliver it with a good potential profit. Unfortunately, the only one to profit is the one running the scheme.
The Commission’s latest case in this area clearly found a sales pitch to attract investors, or at least one group – interests in a start-up company that would produce a reality television series about refurbishing exotic vehicles. SEC v. Legendary Partners, LLC, Civil Action No. 8:23-cv-01282 (C.D. Ca. Filed July 18, 2023).
Named as defendants are the firm and Scott I. Snyder. The firm, now dissolved, had two bank accounts. Each was signed by its president – Mr. Snyder. He was also subject to a cease-and-desist order issued by the California Business, Consumer Services and Housing Agency.
Over about a three-year period, beginning in April 2018, Defendants conducted a nationwide offering that targeted mostly elderly investors. The idea was to solicit investors to acquire interests in a start-up company that promised to use the investor funds to refurbish damaged and exotic luxury vehicles. Those would, of course, be sold when ready to make a profit for all. The scheme was implemented through cold calls made by a man who called himself “Bill Miller” — Mr. Snyder — and used false statements to convince the largely elderly investors to put their money into the refurbishment scheme.
Unlike many offering fraud schemes, the one used here by “Bill Miller” and his company, had a second facet. This variation focused on investors who intended to put their funds into one of two ventures. One was a movie production company. The other was a pharmaceutical company named Biosynetics. Mr. Snyder knew that the investment choices made by this group of investors differed from the one he offered. Rather than convince each investor that refurbishing damaged and exotic luxury vehicles was a better choice, he “tricked” them in the words of the complaint, into putting their funds into his scheme. Stated differently, the investors did not understand that in fact their money had been diverted from the intended investment to the one Mr. Snyder had created for others.
No matter. All the choices ended the same: the money was misappropriated by “Bill Miller” or in reality Defendant Snyder. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b).
Defendants resolved the matter. Each Defendant consented to the entry of a permanent injunction based on each of the Sections cited in the complaint. In addition, Mr. Snyder will be barred from offering or selling securities except for his own account. A director and officer bar will also be imposed. The final judgment will require Mr. Snyder to pay $42,636 in disgorgement, $9,956 in prejudgment interest and a $50,000 penalty. See Lit. Rel. No. 25781 (July 18, 2023).