Investors Beware: Some Investments Are Too Good To Be True

Posted on February 11, 2021

(Written by Senior Investigator David Reign)

The news of today is grim. Once thriving restaurants, local breweries, manufacturing businesses, and small business owners across the country have shut their doors. The unemployment rate has soared to 14.7% in April as employers cut more than 20 million jobs during the month. The travel and vacation industry (airlines, home rentals, and cruise lines), are almost at a standstill, and across America, stores, factories, and offices have been shut down for several months (although a few are starting to open their doors).

But the stock market has shown some life. Many people view this time as an opportunity to invest when stocks have lost some of their value from just a few months ago. The bullish market may be over, but investors seem ready to bet on the future. As you consider investing, keep an eye out for deals that sound too good to be true. Buyer beware or in this case, Investors Beware is the rule of the day. Consider these recent cases that were investigated by the Securities and Exchange Commission (SEC). They have been edited for clarity and space:

The SEC charged a United Kingdom citizen and purported French resident Damon Elliott and his entity Piptastic Limited in connection with a Ponzi scheme, alleging that they fraudulently raised and then misappropriated more than $9 million from at least 80 investors, including at least $5.3 million from at least 30 investors in the United States.

Keep an eye out for deals that sound too good to be true.

The SEC filed charges against small business lender CAN Capital, Inc. for misleading investors in an offering that raised $191 million. CAN Capital’s offering involved the securitization of a revolving pool of merchant cash advances and small business loans. CAN Capital had disclosed to investors that it was required to maintain a minimum number of receivables in the revolving pool, which included writing off delinquent accounts and replacing them with performing assets. The SEC determined that CAN Capital’s collateral for the securitization allegedly contained millions of dollars of non-performing assets that should have been removed from the securitization, which resulted in losses to investors.

And lastly, three individuals were charged with defrauding investors in connection with a purported chocolate caffeinated snack company they controlled. The individuals falsely claimed that Starship Snack Corp. was developing and ready to mass-produce its own caffeinated snack. Investors would receive a one-to-one exchange of Starship shares for Monster or Coca-Cola shares after Starship was acquired by those companies. It turned out, Starship had no agreement with Monster Energy or Coca-Cola, and that investor funds were used to rent and decorate a New York City apartment and on travel, meals, and other personal expenses. Investors were defrauded out of more than $2.3 million.

Morgan and Morgan have a team of lawyers and investigators that investigate and file SEC, IRS, and False Claims Act Whistleblower cases across the country. We work only on a contingent basis. Contact us for more information on how we may help you.