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Financial Services Law Insights and Observations

SEC and DOJ charge two co-CEOs operating a $100 million fraud scheme

Federal Issues California Fintech Fraud SEC DOJ Enforcement

Federal Issues

On November 9, the SEC and DOJ charged two co-CEOs of a tech investment firm for allegedly directing a $100 million fraud scheme. The two individuals were the founders of a failed Fresno-based technology company and were charged with “conspiring to commit wire fraud and taking more than $100,000,000 from various businesses and individuals” under U.S.C. § 1349. The two founders allegedly misled investors through falsified documents, bank records, auditing reports, and accounting statements.

The DOJ alleges that, as recently as January 2022, “[the two individuals lied] to board members, investors, lenders, and others about [the company’s] finances to obtain investments, loans, and other funding… Much of the money went towards paying payroll, including the [co-CEOs’] $600,000 per year salaries.” Authorities discovered the alleged fraud scheme back in May 2023 when the company failed to make payroll and then terminated all its 900 employees. If convicted, the two founders face a maximum statutory penalty of 20 years in prison each and a $250,000 fine.