The Securities and Exchange Commission (SEC) recently charged Roderick Vanderbilt with participating in a scheme to defraud investors in Vinco Ventures, Inc., a publicly traded, purported digital media and content technologies company.
The SEC complaint, filed in the U.S. District Court for the Southern District of New York, charged Vanderbilt with violating anti-fraud provisions of the federal securities laws, specifically: Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 thereunder.
The SEC enforcement action alleged that Vanderbilt engaged in a scheme to defraud the investing public by making material misrepresentations in SEC filings, and by diverting Vinco’s corporate assets to his long-time business associate and former romantic partner, Theodore J. Farnsworth, for his and Farnsworth’s personal benefit.
The SEC further alleged in its lawsuit that Farnsworth did not take a public-facing role at Vinco because he knew that the Department of Justice and the Commission were conducting investigations concerning his conduct in connection with another public company. Nevertheless, Farnsworth, according to the SEC, secretly controlled the company by installing individuals with whom he had close personal and/or professional relationships, including Vanderbilt, as executives and directors of Vinco.
Vanderbilt then allegedly participated in the scheme by signing SEC filings, including a Form 10-K, Forms 10-Q, preliminary and definitive proxy statements, and proxy soliciting materials, that contained materially false and misleading statements. Specifically, according to the complaint, Vanderbilt signed filings that identified the officers and directors of Vinco, but failed to disclose that Farnsworth directed the officers and directors identified in the filings and that he exercised ultimate control over Vinco.
In addition, the SEC complaint contends that Vanderbilt signed SEC filings that materially misrepresented the operational status of key components of Vinco’s business and their potential to generate revenue for Vinco.
Vinco raised more than $131 million in investor capital through the issuance of convertible notes and warrants. Vanderbilt then diverted millions of dollars of Vinco money to Farnsworth, who used the money to pay for both of their personal expenses, including travel, luxury vehicles, and home renovations, and to financially support Vanderbilt, the SEC contends. These benefits were in addition to Vanderbilt’s salary from Vinco, which totaled approximately $160,000 the first year and $190,000 in the first half of the following year, as well as fees of approximately $118,000 that he received for serving on the Vinco Board.
Vanderbilt consented to a bifurcated settlement, subject to court approval, which provides for permanent injunctive relief against future violations of the charged offenses. The judgment also imposes an officer and director bar. In addition, the SEC’s complaint seeks disgorgement with prejudgment interest and civil penalties, which will be determined by the court at a later date, upon motion of the SEC.
The Commission previously charged Farnsworth for his conduct in connection with the scheme.
In a parallel criminal action filed by the Department of Justice and the U.S. Attorney’s Office for the Southern District of Florida, Vanderbilt pleaded guilty to the same unlawful conduct alleged in the SEC’s complaint.
Charged for Participating in a Scheme to Defraud Investors? Call David Chase, Esq.,
Nationally recognized SEC defense attorney David Chase of the Law Firm of David R. Chase has spent the last 25 years strategically representing individuals in SEC investigations around the nation after having worked as a Senior Counsel in the SEC’s Enforcement Division in Miami. If you are under SEC or FINRA investigation, or just received an SEC subpoena or FINRA 8210, and are looking for experienced legal counsel to protect your interests, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website to read about David’s SEC defense background, and to see the firm’s prior successful defense results achieved for its clients at: www.securitiesfrauddefense.net.
