The Securities and Exchange Commission has charged three individuals for allegedly orchestrating a fraudulent snack investment scheme and telling investors that their company would soon be acquired by Monster Energy or The Coca-Cola Company.
The SEC’s complaint alleges that Lisa Bershan and her husband, Barry Schwartz, together with business associate Joel Margulies, conned more than 35 investors into investing more than $2.2 million in a company that purportedly was developing and marketing a caffeinated chocolate snack.
They allegedly told investors that their company, Starship Snack Corp., was on the verge of mass producing the snack and would soon be acquired, at first, by Monster Energy, and later, by Coca Cola.
The SEC said that the trio promised investors that after being acquired, Starship investors would receive a one-to-one exchange of Starship shares for Monster or Coca-Cola shares.
According to the complaint, Bershan and Margulies also claimed that investors had “no down-side risk” and Bershan personally guaranteed that investors could get their investment back with 5 percent interest if the shares failed to appreciate in 12 months.
Starship had no agreement with Monster Energy or Coca-Cola, and Bershan and Schwartz allegedly used investor funds for personal expenses, including rent payments, travel, home décor, and restaurant bills.
“As alleged in our complaint, investors trusted Bershan, Schwartz, and Margulies, but that trust was misplaced,” said Lara Mehraban, associate regional director of the SEC’s New York regional office. “The defendants constantly reassured their investors with lies, all the while taking their money and spending it on themselves.”
In a parallel action, the U.S. Attorney’s office for the Southern District of New York announced criminal charges against the three defendants.
The SEC’s complaint, filed in federal court in Manhattan, charges Bershan, Margulies, and Schwartz with violating antifraud provisions of the federal securities laws and a related SEC antifraud rule. The SEC is seeking to have the defendants return their allegedly ill-gotten gains plus interest, pay penalties, and be subject to permanent injunctions.