KYC: don't buy the Hollywood dream.
Publication:
FCRO Subsection:
Wednesday, 7 April, 2021 - 09:22
The USA's Securities and Exchange Commission has obtained an asset freeze and other emergency relief in an emergency civil (i.e. not criminal court) enforcement action against Los Angeles-based actor Zachary Horwitz and his company, 1inMM (one in a million) Capital, LLC in connection with an alleged Ponzi scheme that raised over USD690 million. Horwitz and 1inMM allegedly told investors that they were buying film rights, purportedly to resell them to Netflix and HBO; in fact, 1inMM actually had no business relationship with either company.
According to the SEC's complaint, Horwitz falsely claimed to have a track record of successfully selling movie rights to Netflix and HBO when, in fact, neither Horwitz nor 1inMM had ever sold any movie rights to, or done any business with, HBO or Netflix.
Horwitz allegedly showed investors fabricated agreements and emails regarding the purported deals with HBO and Netflix.
The complaint alleges that Horwitz and 1inMM promised investors returns in excess of 35%, and for many years paid supposed returns on earlier investments using funds from new investments.
The complaint further alleges that Horwitz misappropriated investors' funds for his personal use, including the purchase of his multi-million dollar home, trips to Las Vegas and to pay a celebrity interior designer.
"We allege that Horwitz promised extremely high returns and made them seem plausible by invoking the names of two well-known entertainment companies and fabricating documents," said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office. "We obtained an asset freeze on an emergency basis to secure for the benefit of investors what remains of the money raised by Horwitz."
The SEC's complaint alleges that Horwitz and 1inMM breached the anti-fraud provisions of the federal securities laws. In addition to the asset freeze and other emergency relief granted by the Court, the complaint also seeks a permanent injunction, disgorgement, pre-judgment interest, and civil penalties against Horwitz and 1inMM.
The Court set a hearing for 19 April, 2021, to determine if the asset freeze should remain in force for the duration of the litigation.
Source: SEC Press Release 6 April 2021
Notes:
Criminal charges may follow: the US Department of Justice and the Federal Bureau of Investigation have worked on the preparation of the civil case.
A civil case has a lower burden of proof and many criminal courts are not especially happy to grant freezing orders on the civil burden even though they have the power. It is therefore common in the USA for the SEC to go to court ahead of prosecutors.
This is a lot of money to flow through bank accounts without anyone noticing: account monitoring appears to have been weak.
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