SEC Obtains Final Judgments Against Defendants in Snack Company Investment Scam
Litigation Release No. 24812 / May 5, 2020
Securities and Exchange Commission v. Lisa Bershan, Barry Schwartz, and Joel Margulies, No. 17-cv-07793 (S.D.N.Y. filed Oct. 11, 2017)
On April 17, 2020, the U.S. District Court for the Southern District of New York entered final judgments on consent against three individuals who were charged with defrauding investors in connection with a purported chocolate caffeinated snack company they controlled.
The SEC's complaint alleged that Lisa Bershan and Barry Schwartz, of California, and Joel Margulies, of Tennessee, falsely claimed that Starship Snack Corp. was developing and ready to mass produce its own caffeinated snack, and that investors would receive a one-to-one exchange of Starship shares for Monster or Coca-Cola shares after Starship was acquired by those companies. The SEC's complaint further alleged that Starship had no agreement with Monster Energy or Coca-Cola, and that Bershan and Schwartz used investor funds as their own personal piggy bank, spending them to rent and decorate a New York City apartment and on travel, meals, and other personal expenses. Investors were defrauded out of more than $2.3 million.
In a parallel criminal action, Bershan and Schwartz pleaded guilty. Margulies was convicted after trial.
The final judgments enjoin Bershan and Margulies 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, and enjoins Schwartz from violating Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. The final judgments also order Bershan, Schwartz, and Margulies to each pay disgorgement of $2,257,531.54 with $68,215.60 prejudgment interest, to be offset by an amount equal to the restitution order entered in each defendant's respective criminal case.
The SEC's investigation was conducted by Cynthia A. Matthews, Kerri Palen, and Thomas P. Smith Jr. of the New York Regional Office and the litigation was conducted by Richard Hong and Ms. Matthews. The matter was supervised by Lara S. Mehraban.