Investment Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Securities and Exchange Commission v. Usee, Inc., et al, Case No. 3:12-cv-01325-M (N.D.Tex.) (filed April 30, 2012)
SEC CHARGES VOIP COMPANY AND ITS OWNERS WITH CONDUCTING A FRAUDULENT OFFERING TARGETING CHRISTIAN INVESTORS
Recently, the Securities and Exchange Commission filed settled fraud charges against the owners of a Dallas-area Voice over Internet Protocol (VoIP) company, for running a fraudulent securities offering aimed at Christian investors, many of whom were affiliated with a Dallas-based private school. The Commission’s complaint, filed in Dallas federal court, alleges that Terry E. Wiese and Scott A. Wiese promised extreme returns – as much as 1,000% in a year – to entice investment in their company, Usee, Inc. Contrary to the Wieses’ claims, however, Usee had no business from which to generate any returns to investors. Instead, the Commission alleges that the Wieses wasted investor funds on poorly considered ventures or sent them to third parties about which they had little information. The Commission also alleges that the Wieses used investor funds for personal expenses and to make Ponzi payments to investors.
According to the complaint, the Wieses and Usee offered two forms of investment: stock and promissory notes. The Wieses promised returns to stock investors of up to 1,000% in the first year. Note investors were promised returns of up to 100% in 60 days. The Wieses also claimed that Usee would earn $26 billion in revenue by its fifth year of business, due to lucrative financing agreements it had arranged. According to the Commission, however, these claims were unfounded, since Usee had only nominal revenue and no financing arrangements.
The Commission alleges that the Wieses told investors that Usee was on the cusp of acquiring another VoIP company that owned valuable technology. In fact, Usee had contracted to acquire this company for $33 million, and sent the company $3 million of investor funds as a down payment. But, according the Commission, Usee and the Wieses never got close to securing funds to complete the acquisition and ultimately forfeited the funds to the other company, a fact never disclosed to investors.
Later, the Commission alleges, the Wieses released more than $1.5 million of investor funds to a company they knew nothing about, NFY Financial Consulting, PLLC. According to the SEC, NFY’s principals – Nail Yaldo and Jack Skrelja – told the Wieses the funds would be used as “proof of funds” to support unspecified “platform trading.” The Commission further alleges that, although they did little due diligence into NFY or its principals, the Wieses assured investors that the funds would be safeguarded in an escrow account and not released for any purpose. The Wieses, however, soon turned investor funds over to NFY without investors’ consent or knowledge.
The Commission has charged the Wieses and Usee with violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Commission’s complaint seeks permanent injunctive relief, civil penalties and disgorgement of ill-gotten gains, with prejudgment interest. The Commission also seeks to bar the Wieses from serving as officers or directors of any public company.
To settle the Commission’s charges, the Wieses and Usee consented to permanent injunctions under Sections 5 and 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Defendants further agreed to disgorge nearly $5.8 million in ill-gotten gains, with prejudgment interest, and the Wieses agreed to pay civil penalties totaling $300,000. Defendants are also permanently enjoined from offering or selling securities issued by any company they own or control and the Wieses are further barred from serving as officers or directors of any public company. The defendants did not admit or deny the SEC’s allegations.
The SEC’s action also names NFY, Yaldo and Skrelja as relief defendants for purposes of recovering the funds released to NFY. The SEC has sought an asset freeze against these parties.