THE â€œNEXT GOOGLEâ€ IS A SHAM
Benedict Van used the lure of Silicon Valley start-ups and their quick profits from IPOs and trading in the after market to lure investors into purchasing shares in nascent ventures which he claimed would be the â€œnext Google.â€ Unfortunately for investors Mr. Vanâ€™s two companies, hereUare and eCity, Inc. were little more than shells. SEC v. Van, Civil Action No. CV 12 1743 (N.D. Cal. Filed April 9, 2012).
hereUare began as PeopleNet in the late 1990s. By 2006 the company was being marketed as a provided of Internet telecommunications services. Those included a search engine, email messaging and online classified. The next year PeopleNet became hereUare. Over the next two years the company raised about $6.2 million from individual investors. Mr. Van told those investors that the firm:
â€¢ Would go public shortly;
â€¢ The IPO deal was done;
â€¢ Goldman Sachs would underwrite the offering;
â€¢ An large law firm with a Silicon Valley office was counsel;
â€¢ Investors could purchase shares at the discounted price of $9 before it went to $18 for institutional investors and $100 in the immediate IPO aftermarket;
â€¢ The company would be the next Google since it search engine was three times more powerful;
â€¢ The firm had a lucrative deal with China Education Research Network, a Chinese government sponsored network, that would secure millions of users; and
â€¢ It had valuable Wi-Fi patents that would generate millions of royalty dollars from Starbucks and others.
The claims were false according to the complaint. The firm was not preparing for an IPO and it had no real business.
eCity, Inc. is similar. The firm claimed to provide online shopping worlds which represented virtual versions of real cities such as New York. Shoppers who clicked on a store were taken to its website.
From June to November 2008 Mr. Van raised $880,000 from investors who purchased private placement shares in the venture. Substantially the same sales pitch was used as for hereUare.
By the end of 2008 and early 2009 Mr. Van exhausted the investor funds. No IPOs had been conducted. Excuses were offered to inquiring investors which were not true.
The Commissionâ€™s complaint alleges violations of Securities Act Sections 5 and 17(a)(2) and Exchange Act Section 10(b). The defendants settled the action, consenting to the entry of permanent injunctions based on the Sections cited in the complaint as to them. Mr. Van also agreed to be permanently barred from serving as the officer or director of a public company. The Commission waived disgorgement and declined to assess a penalty against Mr. Von based on his inability to pay.
Separately an administrative proceeding was filed against hereUare which had filed an Exchange Act registration statement but failed to file the required periodic reports. The company consented to the revocation of that registration statement. In the Matter of hereUare, Adm. Proc. File No. 3-14838 (April 9, 2012).