SEC Obtains Final Judgments in Startup Company Investment Scheme
Litigation Release No. 25301 / January 6, 2022
Securities and Exchange Commission v. Tanmaya Kabra et al., No. 1:18-cv-12058 (D. Mass. filed August 5, 2019)
United States v. Tanmaya Kabra, No. 1:19-cr-10335 (D. Mass.)
The Securities and Exchange Commission announced today that it obtained final judgments against a former Boston, Massachusetts resident and his company, whom the SEC previously charged with defrauding investors by promising them high returns on investments in startup companies, while in reality using large sums of investor money to pay earlier investors and to buy a boat.
According to the SEC's complaint, Tanmaya Kabra told investors they could make double-digit returns with no risk by providing Kabra with short-term infusions of cash to be invested in one or more startup companies in which his company, LaunchByte, purportedly had an ownership interest. The complaint alleged that, upon receiving investor funds, Kabra diverted them almost immediately to his own use, including 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 alleged that Kabra repeatedly lied to investors to keep them from discovering his fraud. On August 6, 2019, the court entered a temporary restraining order and asset freeze against the defendants.
Kabra and LaunchByte.io consented to the entry of final judgments that enjoin them 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. The judgment also orders Kabra to pay disgorgement and prejudgment interest of $567,793, which was deemed satisfied based on the order of restitution entered against Kabra in a parallel criminal case.
In the parallel criminal action, the U.S. Attorney's Office for the District of Massachusetts filed criminal charges against Kabra. Kabra pleaded guilty to four wire fraud charges and, on September 15, 2021, he was sentenced to 21 months in prison and one year of supervised release. Kabra was also ordered to pay restitution in the amount of $1,842,106 and a $15,000 fine.
The SEC's case was handled by Alicia Reed, Patrick Noone, and Amy Gwiazda in the Boston Regional Office.