U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23771 / March 7, 2017
Securities and Exchange Commission v. Joseph Meli, et al., No. 1:17-cv-00632 (S.D.N.Y. filed Jan. 27, 2017)
SEC Charges Five Additional Relief Defendants and Expands Scope of Alleged Fraud in Ticket Resale Ponzi Scheme
The Securities and Exchange Commission today filed an amended complaint charging five additional relief defendants and expanding the scope of a fraud case against Joseph Meli and Matthew Harriton, two New York City men accused of running a Ponzi scheme with money raised from investors to fund businesses purportedly created to purchase and resell tickets to high-demand theater performances and concerts.
The five additional relief defendants named in the SEC's amended complaint are Meli's mother, two of Meli's companies, and two of Harriton's companies based upon their alleged receipt of investor funds. The SEC's original complaint, filed on January 27, 2017, named Meli's wife and one of Meli's companies as relief defendants. The seven relief defendants allegedly collectively received more than $2.5 million of investor funds. The SEC also alleges that investor funds were used to purchase a house in East Hampton, New York for $3 million in cash in the name of Meli's wife.
The SEC's amended complaint also expands the scope of the defendants' alleged fraudulent ticket scheme. The SEC's amended complaint alleges that certain of the defendants solicited investments for the bulk purchase and resale of tickets to events including the Broadway musical Hamilton; Adele, Metallica, and Nine Inch Nails concerts; a concert festival known as Desert Trip, featuring The Rolling Stones, Bob Dylan, Paul McCartney, and other artists; and advance sales for the upcoming Broadway play Harry Potter and the Cursed Child. Meli and Harriton, along with their four purported ticket reselling businesses named Advance Entertainment, LLC, Advance Entertainment II, LLC, 875 Holdings, LLC, and 127 Holdings, LLC, allegedly misrepresented to investors that their money would be pooled to buy large blocks of tickets that would be resold at a profit to produce high returns for investors. The SEC alleges that certain of the defendants misrepresented that agreements were in place with the producer of Hamilton to purchase 35,000 tickets to the musical, and with the theater company associated with Harry Potter and the Cursed Child to purchase 250,000 tickets to the play. The SEC alleges that no such agreements existed and no bulk ticket purchases ever happened.
Meli and Harriton allegedly raised more than $97 million from at least 138 investors in 17 states. The majority of investor funds - $59 million - were allegedly used to make Ponzi payments to prior investors using money from new investors. The SEC alleges that additional investor funds were diverted to enrich Meli and Harriton. Specifically, $1.3 million was paid directly to Harriton, and another $1.5 million was withdrawn from company bank accounts controlled by Meli. An additional $5 million was paid from company bank accounts controlled by Meli for such personal expenses as jewelry and retail purchases, private school and camp tuition, automobiles, private club memberships and expenses, wine, restaurants, driving services, payments to casinos, and travel expenses and hotels. Another $1.8 million was paid from company bank accounts controlled by Meli to architecture, design, or construction firms.
On January 30, 2017, the SEC obtained a temporary restraining order and asset freeze against Meli, Harriton, and their companies.
The SEC's amended complaint charges Meli and Harriton, along with their four purported ticket reselling businesses, with violating Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 and seeks disgorgement of ill-gotten gains together with prejudgment interest, and penalties. Jessica Ingber Meli, Anna Meli, 127 Partners, LLC, 127 Iconic Holdings, LLC, Nineteen Two Productions, LLC, MXCU Holdings, LLC, and Mash Transactions, LLC are named as relief defendants in the amended complaint solely for the purpose of recovering investor funds allegedly in their possession.
The SEC's continuing investigation was conducted by Dahlia Rin, Rebecca Israel, John McCann, and Celia Moore of the Boston office, and the litigation is being led by Martin Healey. The SEC appreciates the assistance of the FBI and the U.S. Attorney's Office for the Southern District of New York.