Proceeds of Offering Fraud Used to Acquire Tropical Fish
As the Government fiscal year drew to a close last week the Commission put on what can only be called an incredible show, filing over 50 new enforcement actions in one week. That is more cases than the agency at times files in one month. Equally incredible is the fact that over 20 different types of cases were filed. The entire week was an achievement.
Now, however, the pace of filing new cases has slowed too normal. This week one of the more notable cases filed is an offering fraud action. In this action Defendants were able to raise over $2 million supposedly for investments but actually diverted to their personal use for a variety of endeavors including the acquisition of tropical fish, perhaps a first. SEC v. Zera Financial LLC, Civil Action No. 8:23-cv-01807 (C.D. Cal. Filed September 27, 2023).
The case names as defendants the firm, a California based entity, and Luis Romero, the CEO, sole owner and control person of Zera. Since the beginning of 2021 Defendants have raised over $2.2 million from about 170 investors. Those investors were solicited through a website, Instagram, a mobile application and word of mouth.
The sales pitch was straight forward – good investment returns were promised. The website challenged investors with slogans such as “See How Much You Can Make.” The promise was 3% interest every month.
Defendants offered three different programs. One was for 6 months for an investment of $500 to $15,000; a second was for one year for investments of $15,000 to $100,000; and the third was for two years if the investment was over $100,000. The interest from each program could be withdrawn and redeposited each month. The principal investment could not be withdrawn until the end of the term. The deposits were, according to the sales pitch, FDIC insured.
Investor funds were deposited in crypto asset accounts. Some portions of the investor cash were used to make Ponzi type payments. Others were diverted to the personal use of Mr. Romero. He used substantial sums of investor capital to pay his personal expenses, purchase an electric truck and of course, tropical fish. The complaint alleges violations of Exchange Act Section 10(b), and Securities Act Section 17(a). The case is in litigation. See Lit. Rel. No. 25878 (October 3, 2023).
Proceeds of Offering Fraud Used to Acquire Tropical Fish
As the Government fiscal year drew to a close last week the Commission put on what can only be called an incredible show, filing over 50 new enforcement actions in one week. That is more cases than the agency at times files in one month. Equally incredible is the fact that over 20 different types of cases were filed. The entire week was an achievement.
Now, however, the pace of filing new cases has slowed too normal. This week one of the more notable cases filed is an offering fraud action. In this action Defendants were able to raise over $2 million supposedly for investments but actually diverted to their personal use for a variety of endeavors including the acquisition of tropical fish, perhaps a first. SEC v. Zera Financial LLC, Civil Action No. 8:23-cv-01807 (C.D. Cal. Filed September 27, 2023).
The case names as defendants the firm, a California based entity, and Luis Romero, the CEO, sole owner and control person of Zera. Since the beginning of 2021 Defendants have raised over $2.2 million from about 170 investors. Those investors were solicited through a website, Instagram, a mobile application and word of mouth.
The sales pitch was straight forward – good investment returns were promised. The website challenged investors with slogans such as “See How Much You Can Make.” The promise was 3% interest every month.
Defendants offered three different programs. One was for 6 months for an investment of $500 to $15,000; a second was for one year for investments of $15,000 to $100,000; and the third was for two years if the investment was over $100,000. The interest from each program could be withdrawn and redeposited each month. The principal investment could not be withdrawn until the end of the term. The deposits were, according to the sales pitch, FDIC insured.
Investor funds were deposited in crypto asset accounts. Some portions of the investor cash were used to make Ponzi type payments. Others were diverted to the personal use of Mr. Romero. He used substantial sums of investor capital to pay his personal expenses, purchase an electric truck and of course, tropical fish. The complaint alleges violations of Exchange Act Section 10(b), and Securities Act Section 17(a). The case is in litigation. See Lit. Rel. No. 25878 (October 3, 2023).