The Securities and Exchange Commission today charged a Silicon Valley man who raised millions for two Internet start-ups by falsely promising investors that his companies were on the verge of undergoing successful initial public offerings and were well on their way to becoming the “next Google.”
The SEC alleges that Benedict Van, of San Jose, Calif., lured investors into web-based start-ups hereUare, Inc. and eCity, Inc. by falsely telling them that the companies would go public within a matter of months and generate millions in quick returns. In truth, Van had no plans to take the companies public and relied solely on investor funds to stay in business. Ultimately, when investor funds ran out by the end of 2008, Van was forced to shut down operations.
“Van played on the hopes of investors, tricking them into believing that his companies were on the verge of becoming the next Silicon Valley success stories,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “Investors should be wary of pitches promising IPO riches from companies with minimal operations and track records.”
According to the SEC’s complaint, filed in federal court in the Northern District of California, Van raised more than $6.2 million from investors for hereUare in 2007 and 2008, and raised $880,000 in investor funds for eCity in 2008. In presentations to prospective investors, chiefly in homes in Sacramento and Stockton, Van held himself out as a wealthy venture capitalist with prior IPO experience. Van told prospective investors that the companies had lucrative deals and patents, and that he had retained Goldman Sachs and an international law firm to help take the companies public within six months. According to the SEC, all of these representations were false.
The SEC’s complaint charges Van and hereUare violated the antifraud and registration provisions of U.S. securities laws, and charges eCity with violations of the antifraud provisions. Van, hereUare, and eCity have agreed to settle the charges against them without admitting or denying the SEC’s allegations and have consented to permanent injunctions. Van also consented to a district court order to permanently bar him from serving as a public company officer or director, and hereUare has consented to an administrative proceeding order deregistering its stock with the Commission. The SEC waived any financial payment against Van based on his demonstrated inability to pay.
Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office conducted the SEC’s investigation.