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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23753 / February 17, 2017

Securities and Exchange Commission v. Darrell Glenn Hardaway and Hardaway Net-Works, Inc., No. 4:17-CV-00529 (S.D. Tex. filed Feb. 17, 2017)

Houston Man Charged with Conducting Multiyear Offering Fraud Targeting Fellow Members of His "Success Club"

The Securities and Exchange Commission today announced charges against Darrell Glenn Hardaway and his company Hardaway Net-Works, Inc. (HNW), arising from their role in a multiyear offering fraud targeting members of a nationwide self-described "success club" known as the Global Information Network (GIN).

The SEC's complaint, filed in federal court in Houston, Texas, alleges that since November 2010, Hardaway has raised at least $4.7 million from over one hundred investors residing in multiple states through the U.S. Hardaway, who was a high-ranking member in GIN, marketed securities in his company, HNW, to his fellow members. Hardaway focused on GIN members both because they had great trust in him and because they had taken an oath not to criticize him. Hardaway persuaded GIN members to invest in HNW through promises of securing a national roster of customers and ultimately taking the company public. The SEC's complaint alleges that Hardaway's representations were false. In fact, the complaint alleges that Hardaway instead used most investor funds to pay himself a salary and on various personal expenses. As the years passed, Hardaway continued to mislead HNW investors regarding HNW's business prospects, prospects for going public, and the use of investor funds. When victims sought information about their investments, the SEC alleges that he refused to answer their questions, threatened legal action, and cited a GIN-related rule that prohibits members from criticizing each other.

Hardaway also allegedly used $40,000 of investor funds to acquire a non-operating public shell company that he renamed Vortronnix Technologies, Inc. While in control of Vortronnix, Hardaway signed the company's Form 10-Q for the third quarter of 2015 and certifications required by Sarbanes-Oxley despite knowing that there had been no review of the company's financial statements by its auditor, as required by SEC rules. Vortronnix's auditor immediately directed Hardaway to withdraw the Form 10-Q, a directive which Hardaway allegedly ignored. Vortronnix did not publicly disclose that the auditor had not reviewed the company's third quarter of 2015 financial statement until 3 1/2 months after the auditor's directive, when Vortronnix filed a Form 8-K announcing the resignation of its auditor.

The SEC alleges that Vortronnix remains delinquent in its public reports with the SEC and has never traded publicly.

The SEC's complaint charges Hardaway and HNW with violating Sections 5(a) and (c), and Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and charges Hardaway with violating Section 13(b)(5) of the Exchange Act and Exchange Act Rule 13a-14, and aiding and abetting Vortronnix's violations of Sections 13(a) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 13a-13 and 13a-15(a).

Without admitting or denying the allegations in the SEC's complaint, Hardaway and HNW each agreed to the entry of permanent injunctions and to defer determination of any disgorgement, prejudgment interest, and civil penalties. Hardaway also agreed to the entry of an officer and director bar. The settlement is subject to court approval.

The SEC's investigation was conducted by Jeffrey Cohen and Jody Moore of the SEC's Fort Worth Regional Office. The case was supervised by David L. Peavler and David Reece. Christopher Davis will lead the litigation over disgorgement, prejudgment interest and penalties.

SEC Complaint

 

https://www.sec.gov/litigation/litreleases/2017/lr23753.htm


Modified: 02/17/2017