SEC Charges Brewery, Recidivist Owner, and Other Individuals with Fraud

Litigation Release No. 25149 / July 28, 2021

Securities and Exchange Commission v. Mine Shaft Brewing, LLC et al., No. 2:21-cv-00457-DAO (D. Utah filed July 27, 2021)

The Securities and Exchange Commission today announced charges against a Utah-based company and its principals for an alleged offering fraud that raised at least $2.7 million from more than 100 individual investors.

According to the SEC's complaint, filed in federal district court in Salt Lake City, Utah, recidivist Timothy Andrew Nemeckay, John Allen Logan, and Charles Vernon Whittington told investors that their funds would be used to develop the Mine Shaft Brewery, which included building a brewery, restaurant, and retail store. Investors were allegedly told that approximately 70% of invested funds would be used to acquire brewery and restaurant equipment and to purchase a building or make improvements to an existing building, with the remaining 30% of invested funds used for inventory and other Mine Shaft business expenses. Instead, as alleged, Nemeckay used his personal LLC as a pass through to pay his personal expenses, including restitution obligations to victims from his prior securities fraud scheme. The complaint alleges that in all, Nemeckay used approximately $1.7 million (63%) of investor funds for his own personal use. The complaint further alleges that, of the remaining investor funds, approximately 10% were used to make Ponzi payments to investors and 10% were used to compensate Whittington and Logan, with less than 17%, used consistently with disclosures to investors.

The SEC's complaint charges Mine Shaft, Nemeckay, Logan, and Whittington with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b¢€'5 thereunder, and the registration provisions of Securities Act Sections 5(a) and 5(c). The complaint also charges Nemeckay with violating Section 15(b)(6)(B)(i) of the Exchange Act. The SEC seeks, among other relief, permanent injunctions, a conduct-based injunction, disgorgement of ill-gotten gains plus prejudgment interest thereon, and civil penalties.

The U.S. Attorney's Office for the District of Utah, which conducted a parallel investigation of the matter, previously indicted Nemeckay on securities fraud, among other criminal charges. Additionally, the Utah Department of Commerce¢€'Division of Securities, which also conducted a parallel investigation of the matter, previously filed a civil action against Mine Shaft Brewing, Nemeckay, Logan, and Whittington for violating the antifraud and licensing and registration provisions of Utah law.

The SEC's investigation was conducted by Amy Oliver of the Salt Lake Regional Office, and the litigation will be led by Casey Fronk. The SEC appreciates the assistance of the Utah Department of Commerce¢€'Division of Securities and the Utah Attorney General's Office.