SEC Charges Media Company and Principals with Fraud

The SEC charged a media and entertainment company and several of its principals with fraud in a scheme to solicit investments using "vastly inflated" historical annual revenues.

According to the Complaint, filed in the Eastern District of New York, the SEC alleged that the company, at the direction of its CEO and former COO, provided prospective investors with pitch decks and financial information that significantly overstated the company's financial condition. The SEC alleged that the company's CEO and COO falsely claimed that "well-known and sophisticated investors" had agreed to make substantial investments in the company and that the company's former chief of staff helped prepare and circulate false statements. Additionally, the SEC alleged that in an attempt to secure a large investment from a bank, the company's COO impersonated an executive at a partner company and embellished the company's working relationship with that partner.

The SEC charged the company, its CEO, its former COO, and its former chief of staff with violating SA Section 17 ("Fraudulent Interstate Transactions"), SEA Section 10 ("Regulation of the Use of manipulative and deceptive devices") and SEA Rule 10b-5 ("Employment of manipulative and deceptive devices"). The SEC also alleged that the company's principals aided and abetted the violations. The former COO and former chief of staff have consented to the entry of judgments against them.