By Rebecca Kahn, J.D.
Without admitting or denying allegations, a beverage company and its former CEO charged with securities fraud consented to entry of a permanent injunction and nearly $400,000 in disgorgement, interest and penalties (SEC v. Weber, October 30, 2018, Irizarry, D.).
On September 5, 2018, the SEC charged Bebida Beverage Co. and its former CEO and President, Brian Weber, with employing a fraudulent scheme to generate cash for his own benefit and to support Bebida's failing business operations.
Bebida. In or around 2003, Brian Weber began to develop energy drinks and later, relaxation drinks, targeting the Latin American market. In November 2009, his company, Bebida, became a public company through a name change of a publicly traded shell company. As Bebida failed to generate sufficient cash flow, Weber employed a series of fraudulent schemes to acquire money.
The scheme. According to the SEC's complaint, filed in the federal district court for the Eastern District of New York, Weber devised and operated a multi-pronged scheme to generate cash and support his failing company. He created a fictitious convertible note and then, by deceiving Bebida’s transfer agent, had the note converted into common shares that were sold to the public with the proceeds transferred back to Bebida.
Weber also used sham transactions to fraudulently inflate the number of outstanding Bebida shares, which he subsequently retired. Weber then issued false press releases touting the retirement of the shares as a buyback, artificially inflating the company's share price. Finally, Weber sold other sham convertible debt and altered the checks that he had received as payment so that he could deposit them into bank accounts that he controlled.
Violations. The SEC’s complaint charged Bebida and Weber with violating registration and antifraud provisions of the federal securities laws, including Securities Act Sections 5(a), 5(c), and 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder.
Settlement order. Weber consented to the entry of a judgment ordering him to pay $208,000 in disgorgement, $23,436 in prejudgment interest, and $160,000 in civil penalties, permanently enjoining him from similar violations in the future, and imposing a permanent officer-and-director bar and penny stock bar.
The case is No. 18 Civ. 05019.
Companies: Bebida Beverage Co.
MainStory: TopStory FraudManipulation SecuritiesOfferings
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