SEC Charges Arizona-Based Financial Services Companies and Their CEO with Fraud
Litigation Release No. 24898 / September 15, 2020
Securities and Exchange Commission v. Gary Pryor, et al, No. 2:20-cv-01782-DJH (D. Ariz. filed September 14, 2020)
The Securities and Exchange Commission today charged two Arizona-based financial service companies and their chief executive officer with defrauding investors of approximately $2.9 million by making false and misleading statements about the companies' revenue and its business prospects.
The SEC's complaint alleges that, between 2015 and May 2019, Gary Pryor, founder and CEO of ZipRemit, Inc. and Lendaily, Inc., private companies that claimed to offer merchant branded consumer credit at the point-of-sale, raised approximately $2.9 million from investors while repeatedly misrepresenting the companies' technological capabilities and revenues. According to the complaint, Pryor falsely told investors that ZipRemit and Lendaily earned revenue from interest and loan origination fees and that the companies had several large nationally-recognized brands as customers. The complaint alleges that Pryor repeatedly misrepresented that the companies had developed proprietary software that had been tested, approved, and launched, or was about to be launched, with customers, when, in fact, the companies had not generated any revenue nor had any customers ever used their software, as it was not fully developed. In addition, Pryor allegedly diverted over $1.2 million of investor funds for his own personal use, including making payments on his 4,000 square foot home and spending money on luxury automobiles, lavish ski trips, and private school tuition for his children.
The SEC's complaint, filed in the U.S. District Court in Arizona, charges ZipRemit, Lendaily, and Pryor with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 thereunder of the Securities Exchange Act of 1934, and seeks permanent injunctions, civil penalties, disgorgement with prejudgment interest, and a conduct-based injunction against Pryor.
The SEC's investigation was conducted by Emily Rothblatt, Jake Schmidt, and Scott Hlavacek of the Chicago Regional Office, and was supervised by Jeffrey Shank. The litigation will be led by Timothy Leiman.