The U.S. Securities and Exchange Commission has filed charges against three men accusing them of defrauding investors in a project that was supposed to build the largest movie studio on the continent in Georgia. They are: Matthew T. Mellon, Manu Kumaran, and Roger Miguel.
According to the regulator, Kumaran, the ex-chairman, CEO and founder of movie production company Moon River Studios, previously called Medient Studios, and his CEO successor Jake Shapiro issued misleading and false statements in corporate filings and press releases. Among their alleged claims is that construction was already happening and there were already projected dates for when the studio would be running even though the two men knew that they didn’t have the money to start building the “Studioplex.”
The two men and Roger Miguel, who was the CEO of Fonu2, are accused falsifying and backdating promissory notes in a scam to put out common stock in return for financing. Fonu2 operated under Moon River Services, Even though the movie studio never became a reality the three men allegedly became rich because of their scam. For example, Shapiro is accused of misappropriating company money for his own spending, including a nearly million-dollar home, and Kumaran allegedl spent about $1700 of company money daily for his travels and personal spending.
Last year, Medient announced that it was shutting down after having moved its assets to Fonu2. At this point, construction still hadn’t begun on the studio and it had not released any videos or movies.
Miguel has settled the SEC charges without denying or admitting to them. Kumaran and Shapiro’s cases, however, are ongoing. Miguel also has agreed to a bar from future penny stick offerings or from serving as a director or company officer for five years.
Fonu2 and Medient are also defendants in this microcap fraud case.
What is Microcap Stock Fraud?
This type of securities fraud typically involves stocks belonging to microcap companies. Microcap companies have low stock prices and assets. According to Investor.gov, signs of a possible microcap fraud may include stocks of companies with real business operations, unsolicited recommendations of a stock, trading suspension by the SEC, an unexplained rise in trading volume or stock price, and changes to the business plan or company name on a frequent basis.
Meantime, SEC charges have also been brought against three Medient company directors. Although they are not accused of involvement in the securities fraud, they face claims accusing them of violating federal securities laws by not reporting their stock transactions in a timely manner while they were on the company’s board. The men are ex-New York Governor David Paterson, music producer Charles Koppelman, and former NY Republican Party Finance Committee chairman Matthew Mellon.
Paterson and Koppelman will pay $25K in penalties but are not denying or admitting to the SEC charges. The case against Mellon will go to a public hearing in front of an administrative law judge. The Commission said that the three men failed in their duty to comply with reporting requirements of beneficial ownership under federal securities laws.