The Securities and Exchange Commission has charged Benedict Van with investment fraud. The San Jose, California man is accused of making false promises to get investors to put their money into two of his Internet companies that he claimed would become the “next Google.”
The names of the start-ups: eCity, Inc. and hereUare, Inc. Van allegedly falsely told prospective investors that the companies were to go public soon, which would result in millions of dollars in fast returns. However, according to the SEC, Van had no intention of taking his companies public and he used the money given to him by investors to stay in operation. About 100 investors gave funds to Van.
The Silicon Valley local would allegedly travel to cities in Northern California to visit potential investors in their own homes. Per the Commission’s complaint, investors gave Van over $6.2 million in 2007 and 2008 for hereUare. He was able to collected $880,000 in investor funds for eCity.
During presentations to potential investors, Van allegedly made it appear that he was a rich venture capitalist with previous IPO experience. He also claimed that the start-ups had lucrative patents and deals. He said that Goldman Sachs and an international law firm were poised to help him take the companies public. Van even offered to sell the shares at $9/share in a private offering, making it appear as if this was a “discount” and that the stock price would soon go up to $18 share for institutional investors. He bragged that after hereUare’s IPO, stock prices would likely hit $100. He showed investors Google’s stock price chart and caused them to think that they would make millions, much like the returns that happened with Google and Chinese search engine company Baidu. All of these were misrepresentations.
Van closed up shop in 2008 when money from investors ran out. The SEC says both companies committed securities fraud and antifraud violations.
To settle the investment fraud case, Van has agreed to a permanent bar from serving as a public company director or officer. Meantime, hereUare has consented to an order that it deregister its stock. Van won’t have to make a payment to settle the securities case because he has shown that he would not be able to pay it.
The people that Van targeted were inexperienced, retail investors. Unfortunately, it is their inexperience that makes retail investors a prime target for fraudsters. While commenting on the charges against Van, SEC San Francisco office director Marc Fagel, gave a shout out to investors warning them to be wary of pitches from companies with little track record or a small operations that are making claims of inevitable IPO wealth.
Read the SEC Complaint (PDF)
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