The Securities and Exchange Commission charged two individuals with defrauding elderly investors in a penny stock scheme involving Florida entertainment companies and their "Spongebuddy" product.
The charges are part of the Miami Regional Office's Recidivist Initiative, which has thus far resulted in enforcement actions against 23 individuals, nine of whom also have been charged by criminal authorities.
The SEC's complaint charges Joseph Rubbo and Angela Beckcom Rubbo Monaco, both of Coral Springs, Florida, with defrauding investors through offerings by their companies VIP TV LLC, VIP Television Inc., and The Spongebuddy LLC. Rubbo and Monaco are repeat offenders whose prior securities schemes resulted in criminal convictions against Rubbo and SEC injunctions against both Rubbo and Monaco.
According to the SEC's complaint, Rubbo and Monaco raised at least $5.4 million from 11 primarily elderly investors to fund the growth of their entertainment business and develop the Spongebuddy, a sponge-like glove purportedly to be sold in stores.
"As alleged in our complaint, Rubbo and Monaco defrauded investors by stealing millions of dollars from elderly investors which they spent on themselves and their family members instead of investing in their businesses," said Steven Peikin, co-director of the SEC's Enforcement Division, said in a statement. "Both Rubbo and Monaco were caught through the efforts of the Miami Regional Office's Recidivist Initiative, which is part of our ongoing focus to rid the markets of repeat securities law violators."
The SEC's complaint alleges that Rubbo and Monaco controlled the companies and hired Steven Dykes to cold call investors and pitch investments in VIP. For example, Dykes allegedly told an investor that the Starz cable channel and Pandora Radio were both interested in buying VIP and would "roll up" VIP into these entities. The investor also was allegedly told that the Spongebuddy would be featured on the television show "Shark Tank" and marketed on QVC.
Contrary to alleged representations that investor money would be used to benefit the VIP companies, Rubbo and Monaco misappropriated more than $2.6 million in investor funds to pay themselves and their relatives as well as undisclosed sales commissions to Dykes. The complaint also alleges they paid for personal expenses such as the down payment on a luxury vehicle, credit card bills, unrelated construction work and to finance a business operation for a Monaco family member.
During the time of the alleged scheme, neither Rubbo, Monaco, nor Dykes were registered with the Commission.
The SEC's complaint charges Rubbo and Monaco with violating the antifraud provisions of the federal securities laws. The SEC also charged Dykes with violating the broker-dealer registration provisions, and Rubbo and Monaco with aiding and abetting violations by Dykes. The SEC is seeking the return of the defendants' allegedly ill-gotten gains with interest, monetary penalties, a permanent injunction, and other relief.
The U.S. Attorney's Office for the District of Colorado has filed parallel criminal charges against Rubbo, Monaco, Dykes and others relating to the scheme.
Advisor Charged for Investment Scheme Involving Seniors
Daniel Glick, a Chicago investment advisor, has been charged in federal court with one count of wire fraud, according to an SEC announcement.
Glick is currently a defendant in a parallel enforcement action brought by the SEC.
According to a criminal information filed by the U.S. Attorney's Office for the Northern District of Illinois, from at least 2011 through at least 2017, Glick misappropriated at least $5.2 million from clients and financial institutions, furnished forged checks and other phony documents to financial institutions, and lied to clients about the use and safety of their investments.
The criminal information further states that most of the funds that Glick misappropriated belonged to elderly clients, including his in-laws and an individual in a nursing home, and that Glick used some of the stolen funds to pay personal and business expenses.
On March 23, the SEC brought an emergency action and obtained a temporary restraining order against Glick and his unregistered, Chicago-Based investment advisory firm, Financial Management Strategies, based on substantially the same conduct.
Glick and FMS later consented to the entry of a preliminary injunction. The SEC's litigation against Glick and FMS continues.
