On September 27, 2006, the Securities and Exchange Commission filed a Complaint in federal court in San Francisco, CA, alleging that the principals of The Children's Internet, Inc., Pleasanton, CA, had defrauded investors into purchasing 2.7 million shares in the company at a cost of about $5.5 million.
The Complaint alleged that the investors' funds were largely diverted from the intended corporate purposes to personal expenses involving luxury automobiles, gambling debts, and expenses. Among other charges including false filings, the Defendants Hamedanis allegedly failed to disclose to investors that up to 25% of their investment would be paid as commissions to two stock promoters, or that some of the stock proceeds were secretly funneled back to the Hamedanis and to Two Dog Net, Inc., a company they controlled. SEC v. The Children's Internet, Inc., Nasser V. Hamedani, Sholeh A. Hamedani, Peter A. Perez, Cort L. Poyner and Two Dog Net, Inc (NDCA, September 27, 2006).
One By One
On March 19, 2008, a final judgment was entered by consent against Defendant Perez, permanently enjoining him from future securities law violations.
On April 3, 2008, a jury found stock promoter Defendant Poyner guilty of fraud.
On October 23, 2008, Judge Claudia Wilken entered final judgments against the Hamedanis in the SEC's civil action, holding them jointly and severally liable for disgorgement and prejudgment interest of approximately $4 million and individual fines of $100,000 in civil penalties. The final judgments also imposed permanent injunctions against the Hamedanis, prohibited them from serving as an officer or director of a publicly reporting company, and prohibited them from engaging in penny stock transactions.
On May 12, 2009, father and daughter Nasser Hamedani, 74, and Sholeh Hamedani, 44, of Antioch, CA, were indicted by a federal grand jury (and thereafter, on July 21, 2009, named in aSuperseding Indictment) with conspiracy, securities fraud, false statements to accountants, false books and records, and obstruction of justice.
On November 9, 2011, the Hamedanis pleaded guilty to conspiracy to obstruct justice. As part of their plea, they admitted to making false statements while under oath, and to producing fraudulent documents in order to impede and obstruct the SEC's investigation.
On April 3, 2012, the Nasser Hamedani and Sholeh Hamedanis were sentenced in the Northern District of California by Judge Claudia Wilken to 25 months and 20 months in prison, respectively, with a two-year term of supervised release; and ordered to perform 1,750 hours of community service as part of their two-year terms of supervised release.
A restitution hearing for May 22, 2011 at 2:30 p.m. in order to accommodate the large number of victims with potential claims against the defendants and coordinate any restitution with the existing final judgments.
Bill Singer's Comment
First, a lot of folks got burned during the DotCom boom. Now, we've got the new JOBS Act and Crowdfunding and all sorts of newfangled ways of raising money for all sorts of purportedly great ideas. I'd tell you to be careful but what's the point. As if what - anyone ever listens to such a warning?
I'm seeing it and hearing it all over again. I'm too old to understand. I'm out of touch. It's about traffic. It's about hits. It's about growing critical mass through unique visitors. At some point, the wunderkinds will figure out how to turn all that online activity into . . . what's that concept called that I'm too hung up on and they don't quite grasp? Oh, yeah, excuse my senior moment here. CASH. PROFITS.
So, do me a favor, cool your jets when you're trying to pitch me about your online business. I don't care about your traffic. I want to understand how you're going to generate revenue. After that, I want to learn how you plan to turn that income into cash, and, then, even more importantly, how you're going to realize a profit - as in the return on my investment and the increase in the share price. And while you're sulking in response to my philistine analysis, puhlease, don't tell me how I'm missing out on the next Apple, Amazon, Facebook, Google. Funny, you don't seem to mentioning how I also missed the boat with Pandora, Groupon or RIM these days.
Fact is, there are lots of con artists out there pumping fraudulent companies - and the whole online mystique is a dream come true to those scamsters with the golden tongue. Of course, even if you have a legitimate company, these are challenging times and merely surviving the start-up face is daunting for the most honest and competent in the biz. Don't get dazzled by the fact that some business will be conducted on the Internet. Don't throw caution to the winds simply because you can invest via social media and it seems coooooool. Invest wisely. Ask questions. Lot's of 'em. Do your own homework. Omigod, have I really turned into that old a man?