Litigation Release No. 24411 / February 26, 2019
Securities and Exchange Commission v. Daniel Adams, Michael Flanders, Spiderworx Media LLC, and An L.A. Minute LLC,, Civil Action No. 2:19-cv-01412 (C.D. Cal., filed February 26, 2019)
The Securities and Exchange Commission today charged movie director and convicted felon Daniel Adams, music producer Michael Flanders, and companies under their control with defrauding two investors in connection with financing the movie entitled An L.A. Minute.
The SEC's complaint alleges that, in 2016, Adams and Flanders induced the two individuals to invest $160,000 through two companies, Spiderworx Media LLC and An L.A. Minute LLC, using a pattern of lies and deception.
According to the complaint, Adams and Flanders falsely stated to one of the investors that they had each invested in the film and would not receive any of the funds being raised until bank financing was obtained. The complaint further alleges that Adams misrepresented how investor proceeds had previously been spent and fraudulently stated that the money the investor had provided would be used exclusively to pay attorneys. The complaint alleges that, in reality, Adams and Flanders received $21,062 and $18,500, respectively, from the $60,000 investment, and that only $20,000 was paid to an attorney.
The complaint further alleges that Adams and Flanders also made misrepresentations to the second investor, who said he would invest $100,000 only if $200,000 was first raised elsewhere. According to the complaint, Flanders forwarded the investor two fabricated emails Adams had prepared containing a fictitious wire transfer confirmation and a forged signature page, to create the false appearance that $200,000 had been raised from another investor. The complaint alleges that Adams and Flanders personally received $29,000 and $10,000, respectively, from the $100,000 investment.
Adams previously pleaded guilty to tax fraud and larceny in 2012, was ordered to pay nearly $4.4 million in restitution to the State of Massachusetts, and served a twenty-one month prison term.
The SEC's complaint, filed in federal court in California, charges Adams, Flanders, Spiderworx Media LLC, and An L.A. Minute LLC, with violations of the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The complaint seeks injunctive relief, including a conduct-based injunction prohibiting Adams from participating in any unregistered securities transactions, disgorgement of ill-gotten gains plus prejudgment interest by Adams and Flanders, and penalties against all the defendants.
The SEC's investigation was conducted by William S. Fiske and supervised by Victoria A. Levin of the SEC's Los Angeles Regional Office. The litigation will be led by Amy J. Longo.