The Securities and Exchange Commission (SEC) on Wednesday charged streaming service Vuuzle Media Corp. and its founder with fraudulently offering over $14 million in securities via a boiler room scheme.
According to the SEC’s complaint, Vuuzle and founder Ronald Shane Flynn utilized salespeople primarily based in the Philippines to run an “aggressive and high-pressure sales campaign.” The alleged misconduct occurred from September 2016 through at least May 2020.
Through the alleged scheme, investors were led to believe Vuuzle was growing company and “pre-IPO” investment opportunity when truly the company hadn’t made a profit or public offering on any stock exchange, the SEC said.
The agency further alleged Flynn misappropriated $4.9 million of investor funds for personal use and that $5.5 million in investor funds was used to sustain the boiler room and pay commissions to Flynn and others for recruiting investors.
The charges: The SEC complaint, filed in federal court in the District of New Jersey, charges Vuuzle and Flynn with violating the anti-fraud and registration provisions of the federal securities laws. Also facing charges is a second individual, Richard Marchitto, for aiding and abetting Vuuzle’s alleged scheme by acting as a financial presence for the company. The SEC seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties against each defendant.
Compliance message: One measure banks can employ to mitigate and identify boiler room fraud is to proactively monitor their transactions. For example, they can screen their databases to establish if the bank is unknowingly providing services to fraudsters. The SEC’s Office of Investor Education and Advocacy has also issued investor alerts on the red flags of investment fraud.