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Fintech Company Founder Charged with Scheme to Defraud Investors

Fintech Company Founder Charged with Scheme to Defraud Investors

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Mozido Inc. Founder Charged with Scheme to Trick Hundreds of Investors to Invest in His Shell Companies

On April 2, 2018, the Securities and Exchange Commission announced that it has charged Michael Liberty (“Liberty”), the founder of the fintech startup now known as Mozido Inc., with a scheme to trick hundreds of investors into investing in his shell companies instead of Mozido.  Liberty and his accomplices then allegedly stole most of the more than tens of millions raised to fund a lavish lifestyle that included private jet flights, multimillion dollar residences, expensive cars, and movie production ventures.

The SEC’s complaint, filed March 30, 2018, alleges that Liberty; his wife, Brittany Liberty; his attorney, George Marcus; his cousin, Richard Liberty; and his cousin’s friend, Paul Hess, induced investors to purchase unregistered interests in shell companies controlled by Liberty that supposedly owned transferrable interests in Mozido.  The shell companies, in reality, either did not own, or were not permitted to transfer, interests in the company.

The SEC also alleges that Liberty and his accomplices lied to investors about Mozido’s valuation and finances, the amount Liberty had personally invested in Mozido, and the use of their funds.  According to the complaint, Liberty and his accomplices later orchestrated a series of transactions in which they used investors’ own money to heavily dilute their interests and duped investors into trading securities for those worth more than 90% less.

The SEC’s complaint, filed in U.S. District Court, District of Maine, charges the defendants with violating the antifraud and registration provisions of the federal securities laws.

According to the complaint:

Michael Liberty . . . and his accomplices engaged in a long-running fraudulent scheme using multiple fraudulent securities offerings. They tricked investors into believing that they were funding fast-growing startup companies. They were not. Liberty and his accomplices lied to those investors about the financial prospects of the startups, the use of their investment dollars, Liberty’s involvement with the startups, and the nature of the investments offered. Through these lies, Liberty and his accomplices enriched themselves at the expense of both the investors and the startup companies. Through their scheme, Liberty and his accomplices raised more than $55 million from hundreds of investors, misappropriating most of it to fund Liberty’s lifestyle, including chartered flights, a dairy cow farm, and the funding of a movie production.

Defendants’ fraudulent scheme centered on MDO, a financial technology company (then known as Mozido LLC), and later on Mozido, Inc., which bought all of MDO’s assets. Liberty claimed to be the founder of MDO and served as a de facto officer of MDO and Mozido, Inc. From 2010 to 2017, Liberty and his associates used shell companies (for example, a company Liberty named “Mozido Invesco”) to raise money from hundreds of investors, who purchased securities in the form of promissory notes issued by the shell companies without active business operations. Liberty and his associates represented that these notes provided a vehicle for investment in MDO.

(Emphasis added)

Source: SEC.gov

Kehoe Law Firm, P.C.