The Securities and Exchange Commission today charged three individuals who defrauded investors in a company that falsely claimed to be developing a caffeinated chocolate snack and nearing an acquisition by Monster Energy or Coca-Cola Co.
The SEC’s complaint alleges that Lisa Bershan and her husband, Barry Schwartz, together with business associate Joel Margulies, falsely promised investors that after being acquired, Starship Snack Corp. investors would get a one-to-one exchange of Starship shares for Monster or Coca-Cola shares. According to the SEC’s complaint, Bershan and Margulies also falsely 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 over a year.
According to the SEC’s complaint, Starship had no agreement with Monster Energy or Coca-Cola , and Bershan and Schwartz used investor funds as their own personal piggy bank, spending them to rent and decorate a New York City apartment, and on travel, meals, and other personal expenses.
“As alleged in our complaint, investors trusted Bershan, Schwartz, and Margulies, but that trust was misplaced,” said Lara S. 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 today 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.
The SEC’s investigation was conducted by Cynthia A. Matthews, Kerri Palen and Thomas P. Smith Jr., and the litigation will be led by Ms. Matthews and Richard Hong. The case is being supervised by Ms. Mehraban. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.