SEC Obtains Temporary Restraining Order and Asset Freeze in Startup Company Investment Scheme

Litigation Release No. 24556 / August 8, 2019

Securities and Exchange Commission v. Tanmaya Kabra et al., No. 1:19-cv-11676 (D. Mass. filed August 5, 2019)

The Securities and Exchange Commission today announced that it has obtained a temporary restraining order and asset freeze against defendants Tanmaya (a/k/a Tan) Kabra and, LLC in the SEC's previously filed emergency action, in which the SEC alleges that the defendants defrauded retail investors by promising to invest their money in start-up companies, while instead using hundreds of thousands of investor funds to make payments to earlier investors and to buy a boat.

According to the SEC's complaint, Kabra, through, told investors they could make double-digit returns in a matter of months with no risk by providing Kabra with short-term infusions of cash to be invested in one or more startup companies in which LaunchByte purportedly had an ownership interest. In fact, these "investment" opportunities were fabrications, the SEC alleges; upon receiving investor funds, Kabra diverted them almost immediately to his own use-in one instance, to pay for a boat Kabra had agreed to purchase, and, in other instances, to pay back earlier investors in Ponzi-like distributions. The SEC alleges that Kabra repeatedly lied to investors to keep them from discovering his fraud.

The temporary restraining order restrains defendants from violating the antifraud provisions of 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, orders that the defendants' assets be frozen, and temporarily prohibits them from soliciting or accepting any investor funds, among other things. The SEC's motion for a preliminary injunction extending the emergency relief through the conclusion of the case has been set for August 15, 2019.

The SEC's investigation was conducted by Emily R. Holness, Alicia M. Reed, Patrick Noone, and Amy Gwiazda of the Boston Regional office. The litigation is being led by Rachel Hershfang. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Massachusetts and the Federal Bureau of Investigation.