SEC Charges ‘Penny Stock’ Operators With Defrauding Elderly Investors
SEC Charges ‘Penny Stock’ Operators With Defrauding Elderly Investors
Last week, the Securities and Exchange Commission charged two individuals with defrauding elderly investors in a penny stock scheme involving Florida entertainment companies and their “Spongebuddy” product.
The SEC’s complaint charges Joseph A. Rubbo and Angela Beckcom Rubbo Monaco with defrauding investors through offerings by their companies VIP TV LLC, VIP Television Inc., and The Spongebuddy LLC.
Rubbo and Monaco are repeat offenders whose prior securities schemes resulted in criminal convictions against Rubbo and SEC injunctions against both Rubbo and Monaco.
According to the SEC’s complaint, Rubbo and Monaco raised at least $5.4 million from 11 primarily elderly investors to fund the growth of their entertainment business and develop the Spongebuddy, a sponge-like glove purportedly to be sold in stores.
The SEC’s complaint alleges that Rubbo and Monaco controlled the companies and hired Steven J. Dykes to cold call investors and pitch investments in VIP. For example, Dykes allegedly told an investor that the Starz cable channel and Pandora Radio were both interested in buying VIP and would “roll-up” VIP into these entities. The investor also was allegedly told that the Spongebuddy would be featured on the television show “Shark Tank” and marketed on QVC.
Contrary to alleged representations that investor money would be used to benefit the VIP companies, Rubbo and Monaco misappropriated more than $2.6 million in investor funds to pay themselves and their relatives as well as undisclosed sales commissions to Dykes. The complaint also alleges they paid for personal expenses such as the down payment on a luxury vehicle, credit card bills, unrelated construction work and to finance a business operation for a Monaco family member.
“As alleged in our complaint, Rubbo and Monaco defrauded investors by stealing millions of dollars from elderly investors which they spent on themselves and their family members instead of investing in their businesses,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “Both Rubbo and Monaco were caught through the efforts of the Miami Regional Office’s Recidivist Initiative, which is part of our ongoing focus to rid the markets of repeat securities law violators.”
The SEC’s complaint charges Rubbo and Monaco with violating the antifraud provisions of the federal securities laws. The SEC also charged Dykes with violating the broker-dealer registration provisions, and Rubbo and Monaco with aiding and abetting violations by Dykes. The SEC is seeking the return of the defendants’ allegedly ill-gotten gains with interest, monetary penalties, a permanent injunction, and other relief.
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