SEC v. COLLECTOR’S COFFEE, INC.; MYKALAI KONTILAI; and VERONICA KONTILAI, No. 1:19-cv-04355, Southern District of New York (Jan. 1, 2019) — Complaint

TERRY R. MILLER
[email protected]
MARK L. WILLIAMS
[email protected]
SECURITIES AND EXCHANGE COMMISSION
1961 Stout Street, 17th Floor
Denver, Colorado 80294
(303) 844-1000

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

UNITED STATES SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

- against -

COLLECTOR’S COFFEE, INC. ( d/b/a
COLLECTORS CAFÉ), and MYKALAI KONTILAI,

Defendants, and

VERONICA KONTILAI,

Relief Defendant

19-cv-04355-LGS-GWG
ECF CASE

AMENDED COMPLAINT

JURY TRIAL
DEMANDED

Plaintiff, United States Securities and Exchange Commission (the “SEC”), for its
Amended Complaint against defendants Collector’s Coffee, d/b/a Collectors Café (“Collectors
Café”), Mykalai Kontilai ( together with Collectors Café, the “Defendants”) and relief defendant
Veronica Kontilai, alleges:
SUMMARY OF ALLEGATIONS
1. Mykalai Kontilai, through his entity Collectors Café, raised millions of dollars by
representing to investors that they would use the funds to develop a website for the auction of

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collectibles such as sports memorabilia, as well as an affiliated social network and television
show.
2. Rather than using funds as the Defendants represented to investors, Kontilai
misappropriated more than $6.1 million to fund his lavish lifestyle, funneling approximately $1.9
million to his personal bank accounts, and withdrawing another $4.2 million in cash. Kontilai
actively tried to conceal his misappropriation from investors by funneling their money through
his associate’s bank accounts and from the SEC staff by fabricating documents.
3. In addition to these cash withdrawals and transfers, Kontilai also misappropriated
investor funds to purchase a variety of luxury goods and services ( including from Chanel, Louis
Vuitton, and Cartier), to pay gambling expenses, and to rent an oceanfront condo in Miami.
4. Additionally, Collectors Café and Kontilai misrepresented to investors numerous
material facts about Collectors Café’s business, including Kontilai’s improper use of investor
funds, Kontilai’s personal investment in Collectors Café, the number of dealers signed up to sell
inventory on its online platform, and Collectors Café’s interest in certain assets, including two
original contracts signed by the legendary Jackie Robinson.
5. As a result of Collectors Café and Kontilai’s fraudulent conduct they were able to
raise approximately $23 million from at least 140 investors since April 2014, at least one-quarter
of which Kontilai misappropriated and used for personal expenses.
6. While engaging in this fraudulent conduct, Collectors Café and Kontilai took
actions to prevent investors from communicating directly with SEC about their securities laws
violations. In at least two instances, Collectors Café and Kontilai attempted to resolve investor
allegations of wrongdoing against them by conditioning the return of investor money on the

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agreement of the investors to confidentiality clauses prohibiting the investors from
communicating with law enforcement, including the SEC, about the alleged securities law
violations. In one of these instances, Collectors Café and Kontilai even went so far as to file a
lawsuit claiming that the victims breached the confidentiality provision by communicating with
SEC staff about possible securities law violations. Collectors Café and Kontilai sought punitive
and compensatory damages in that action, including repayment of the money paid to settle
claims of securities fraud. Collectors Café and Kontilai then flaunted to other investors the fact
that they had sued investors for communicating with the SEC.
7. Following the filing of the SEC’s action in May 2019, Collectors Café and
Kontilai have continued to misrepresent to investors material facts about Collectors Café’s
business and the reasons why Kontilai took money from the company for personal expenses,
including continuing to tell investors that he loaned Collector’s Café millions of dollars in the
late 2000s when, in reality, he never lent the company money.
8. Finally, Relief Defendant Veronica Kontilai received illicit funds from Collectors
Café and Kontilai to which she has no legitimate claim.  Specifically, she received from
Collectors Café and Mykalai Kontilai over $300,000 of investor funds that she used for personal
expenses.
SUMMARY OF VIOLATIONS
9. As a result of the conduct described herein, Defendants Collectors Café and
Kontilai obtained money or property on the basis of false and misleading statements and
omissions, and made material false and misleading statements and omissions. Accordingly,
Collectors Café and Kontilai have violated and, unless restrained and enjoined, will continue to

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violate Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)] and Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. § 240.10b-5(b)].
10. As a result of the conduct described herein, Defendants Collectors Café and
Kontilai engaged in a scheme to defraud and have violated and unless restrained and enjoined
will continue to violate Section 17(a)(1) and (3) of the Securities Act [15 U.S.C. § 77q(a)(1) and
(3)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and (c)
thereunder [17 C.F.R. § 240.10b-5(a) and (c)].
11. As a result of the conduct described herein, Defendants Collectors Café and
Kontilai took actions to impede individuals from communicating directly with SEC staff about
possible securities law violations, including by enforcing and threatening to enforce
confidentiality agreements with respect to such communications.  These defendants have thereby
violated, and unless restrained and enjoined will continue to violate, Rule 21F-17 of the
Exchange Act [17 C.F.R. § 240.21F-17].
12. As a result of the conduct described herein, Veronica Kontilai received illicit
proceeds from the fraud of Collectors Café and Mykalai Kontilai to which she has no legitimate
claim and under circumstances in which it is not just, equitable, or conscionable for her to retain
the funds or assets, and therefore has been unjustly enriched.
NATURE OF THE PROCEEDINGS AND REQUESTED RELIEF
13. The SEC brings this action pursuant to the authority conferred upon it by Section
20(b) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b)] and Section 21(d) of
the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78u(d)]. The SEC seeks
preliminary and permanent injunctions against Collectors Café and Mykalai Kontilai, enjoining

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them from future violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)],
Rules 10b-5 [17 C.F.R. § 240.10b-5] and 21F-17 [17 C.F.R. § 240.21F-17] promulgated
thereunder and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], disgorgement of all ill-
gotten gains from activity set forth in this Amended Complaint, together with prejudgment
interest, and civil penalties pursuant to Section 20(d)(1) of the Securities Act [15 U.S.C. §
77t(d)(1)] a nd Section 21(d)(3)(A) [15 U.S.C. § 78u(d)(3)(A)] of the Exchange Act.
14. The SEC seeks a final judgment ordering Veronica Kontilai to disgorge ill-gotten
gains held in her accounts or otherwise received by her, and to pay prejudgment interest thereon.
JURISDICTION AND VENUE
15. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and
22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 21(d), and 27
of the Exchange Act [15 U.S.C. §§ 78u(d), and 78aa].
16. Defendants, directly or indirectly, made use of the means or instruments of
transportation or communication in interstate commerce, the means and instrumentalities of
interstate commerce, or of the mails, in connection with the acts, practices, and courses of
business set forth in this Amended Complaint.
17. Venue lies in this Court pursuant to Section 22(a) of the Securities Act and
Section 27(a) of the Exchange Act. Defendant Collectors Café is a private company founded,
owned, and controlled by Defendant Kontilai with a principal place of business in this District,
and many of the acts, practices, transactions, and courses of business alleged in this Amended
Complaint occurred within this District.

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18. On or about April 1, 2019, the SEC, Collectors Café and Mykalai Kontilai entered
into a tolling agreement tolling conduct back to April 1, 2014.
DEFENDANTS
19. Collector’s Coffee (d/b/a Collectors Café), is a private company founded, owned,
and controlled by Kontilai with its principal place of business in New York, New York. The
Company was incorporated in California on or about May 14, 2007 (as Ultimate Collector Inc.), and
subsequently reorganized as a Nevada C corporation via merger on or about February 22, 2008.
20. Mykalai Kontilai (f/k/a Michael Contile), age 49, resides in Las Vegas, Nevada.
He is the founder, president, and chief executive officer of Collectors Café. Kontilai owns 100
percent of the voting shares of Collectors Café.

RELIEF DEFENDANT
21. Veronica Kontilai, age 46, resident of Miami, Florida, purports to be Mykalai
Kontilai’s wife. Veronica Kontilai has no employment or other professional involvement in
Collectors Café’s business.
FACTS
I.  Mykalai Kontilai Raised Money From Investors for Collectors Café.
22. Collectors Café was incorporated in or around 2007 with a business plan to build
brick-and-mortar coffee houses at which collectors would congregate and have the ability to
purchase collectibles.
23. In or around 2009, Collectors Café moved away from its plan to build coffee
houses because of the associated costs with retail stores. Collectors Café’s business plan then
evolved to its current plan, which involves the creation of an online website for collectibles and

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an associated television show. Collectors Café has described its website as a combination of an
auction site and a social networking site.
24. Between 2007 and 2013, Collectors Café raised approximately $3.75 million from
investors from the sale of convertible promissory notes and Series A Preferred shares. In 2013,
Collectors Café raised $4 million through Series A Convertible Notes (“Series A Notes”). Then,
from approximately April 2014 through approximately December 2018, Collectors Café raised
approximately $21 million from the sale of Series A Preferred shares and Series B preferred
shares and $2 million from Series B Promissory Notes (collectively, the “Collectors Café
Offerings”).
25.  Collectors Café and Kontilai used multiple offering documents when raising
funds pursuant to the Collectors Café Offerings.  In particular, Collectors Café raised money
from investors through at least two different versions of a Private Placement Memorandum
(“PPM”), each dated April 28, 2008.
26. One version of the PPM was created when Collectors Café intended to build
coffee houses where collectors would meet (the “Coffee House PPM”).  Defendants used the
Coffee House PPM with investors prior to 2014, and at least two investors in 2014 received
versions of this PPM.
27. A second version of the PPM (the “Social Media PPM”) is also dated April 28,
2008, but was updated and shortened after Collectors Café moved its business plan away from
constructing coffee houses.

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28. Defendants used the Social Media PPM, as modified by amendments dated
February 1, 2015, October 15, 2015, April 12, 2016, and January 1, 2017, with investors who
invested from 2015 forward.
II. Collectors Café and Kontilai Made False, Fraudulent, and Material
Misrepresentations and Omissions in Connection with the Collectors Café
Offerings.

29. In raising funds from investors pursuant to the Collectors Café Offerings,
Defendants Kontilai and Collectors Café made numerous written and oral material false and
misleading statements and omissions regarding, among other things, the use of investor
proceeds, Kontilai’s investment in Collectors Café, the number of dealers and amount of
inventory on Collectors Café’s website, and the extent of Collectors Café’s ownership of the
Jackie Robinson baseball contracts along with their value.
A. Material Misrepresentations and Omissions Regarding Kontilai’s Use of
Investor Funds.

30. Defendants Collectors Café and Kontilai made material misrepresentations and
omissions regarding the use of investor proceeds that were misappropriated by Kontilai.
31. Throughout the Collectors Café Offerings, by way of written documents and
disclosures sent to investors as well as oral communications made to investors, Collectors Café
and Kontilai represented to investors that it would use investor funds to pursue its stated business
plan.
32. Throughout the Collectors Café O fferings, the written materials provided to
investors and potential investors described the intended use of investors’ money and did not
disclose the type and magnitude of Kontilai’s personal use of their money:

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a. Collectors Café’s standard practice with potential investors was to give them a high level
overview of the Company, then set up a Web-Ex through which investors could see a
mock-up of the website, and then to send them offering documents, including either the
Coffee House PPM or the Social Media PPM, if the investors were interested in
investing.
b. Prior to receiving a PPM, some investors, including Investors A-E, received
demonstrations of Collectors Café’s proposed website.
c. Some investors, including Investor A on or about October 2, 2014, Investor F on or about
September 3, 2014, Investor G on or about February 24, 2015, and Investor K on or about
March 1, 2016, received a written business plan for Collectors Café (“Business Plan”).
d. At least two versions of Collector Café’s Business Plan (one from 2014 and one from
2016) stated, “The offering presented in the PPM is for the General Purpose of increasing
Operating Capital of the Company, in preparation for initial growth and launch of our
website, national television shows and completion of the retail center and television
studio at Caesar’s Palace.”
e. In an email to all investors dated April 23, 2016, which was drafted by Kontilai and sent
out by his assistant on behalf of Collectors Café, Kontilai and Collectors Café stated that
it sought to raise money for “the specific upcoming growth initiatives (outlined below),”
which were then described as the production and distribution of a Chinese and Spanish
language version of the Collectors Café TV Series and a partnership with Warner Music
Group.

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33. These representations were false when made because Kontilai always intended to
use investors’ money for personal use, did use investors’ money for personal use, and ultimately
misappropriated more than 25% of the money raised, including $6.1 million in cash in addition
to extravagant charges on Collectors Café’s credit cards.
34. In fact, from at least 2014 forward, Kontilai had no source of personal income
other than misappropriating investor money.
35. The monies misappropriated by Kontilai were not salary nor compensation, as
there is no employment agreement between Kontilai and Collectors Café that permitted Kontilai
to draw a salary or other form of compensation.
36. Moreover, in order to induce investments, and mislead investors and potential
investors into believing their investments would be used to further Collector Café’s stated
business goal, Collectors Café and Kontilai told investors that Kontilai did not, and would not,
take a salary or other compensation from Collectors Café:
a. Kontilai told potential investors, including Investor F (orally prior to the investor’s
investment in or around September 2014), Investor H (orally prior to the investor’s
multiple investments in or around September 2016, April 2017 and April 2018), and
Investor G (by email on or about September 30, 2015), that he was not taking a salary or
being compensated.
b. In the email to Investor G dated September 30, 2015, Kontilai wrote “I am very frugal
and have not taken a dime of salary to date.”

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c. On a phone call soliciting investors for additional investments on or about February 6,
2017, an agent on behalf of Collectors Café and, on information and belief, under the
direction of Kontilai, highlighted that Kontilai had not taken a salary in over 10 years.
37. The investor funds misappropriated by Kontilai were also not loan repayments, as
Kontilai did not loan money to Collectors Café, there were no loan agreements that permitted
Kontilai to make loan repayments to himself from Collectors Café, nor was it disclosed to
investors that their funds would be used to repay Kontilai for purported loan(s) he made to
Collectors Café.
38. As described more fully below, on or about May 14, 2018, Kontilai
misrepresented to the SEC staff that money he misappropriated from Collectors Café was in fact
legitimate transfers of money to repay Kontilai for obligations owed to him by Collectors Café.
In support of his assertions, Kontilai knowingly created and presented the SEC staff with
fabricated documents (an employment agreement, loan agreement, and bank statement) in an
effort to mislead the SEC and further conceal his misappropriation of investor funds.
39. A reasonable investor would have understood from Collector Café’s disclosures
and Defendants’ statements that Kontilai’s personal use of investors’ funds was not an intended
use of their investments.
40. Each of the above disclosures and representations regarding Collector Café’s use
of investor proceeds were false when made, and Defendants knew, were reckless in not knowing,
or should have known, that their statements concerning the intended use of investors’ money
were false and misleading.

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41. Defendants omitted to state material facts that were necessary to render their
disclosures and representations regarding Collector Café’s use of investor proceeds not
misleading.
42.  T he above misrepresentations and omissions as to use of investor proceeds were
material to investors and potential investors because, among other things, they believed their
investments would be used to further the stated business goal in order to create profits and a
return on their investment, and because the company money used for personal purposes by
Kontilai would necessarily decrease the amount of money available to Collectors Café to
effectuate its business plan.
B. Material Misrepresentations and Omissions Regarding Kontilai’s Personal
Investment in Collectors Café.

43. Defendants Collectors Café and Kontilai made material misrepresentations and
omissions with respect to Kontilai’s personal investment (or lack thereof) in Collector’s Café.
44. Throughout the Collectors Café Offerings, Collectors Café and Kontilai
represented to investors and potential investors, including Investor C (during a web-ex
presentation on or about February 6, 2015), Investor E (during phone calls in our about
August 2016), and Investor H (orally prior to the investor’s multiple investments in or around
September 2016, April 2017 and April 2018), that he had personally invested $5 million in
Collectors Café.  Kontilai told other investors, such as Investor F (orally prior to his investment
in or around September 2014), that he had invested a significant amount of his own money.
45. On a phone call soliciting investors for additional investments on or about
February 6, 2017, an agent on behalf of Collectors Café and, on information and belief, under the
direction of Kontilai, highlighted that Kontilai had invested $5 million in Collectors Café.

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46. Each of the above representations regarding Kontilai’s investment in Collectors
Café was false and misleading because Kontilai did not invest (nor loan) $5 million to Collectors
Café, nor did Kontilai invest or loan a significant amount of his own money to Collectors Café.
47. In fact, as alleged above and more fully described below, in an effort to mislead
the SEC and conceal his fraud, Kontilai created and produced to the SEC a fabricated loan
agreement purporting to document a $5 million loan to the company.
48. A reasonable investor would have understood from Collectors Café’s disclosures
and Defendants’ statements that Kontilai invested $5 million of his own money into Collectors
Café and that that money was available to Collectors Café to use to further its business plan,
served as an incentive to Kontilai to successfully follow through on its business plan, and
validated Kontilai’s confidence in the future success of the business.
49. Each of the above disclosures and representations regarding Kontilai’s investment
in Collector’s Café were false when made, and Defendants knew, were reckless in not knowing,
or should have known, that their statements concerning Kontilai’s investment in Collectors’ Café
were false and misleading.
50. Defendants omitted to state material facts that were necessary to render their
disclosures and representations regarding Kontilai’s investment in Collectors’ Café not
misleading.
51.  T he above misrepresentations and omissions as to Kontilai’s investment in
Collectors’ Café were material to investors and potential investors because, among other things,
it indicated that $5 million had been made available to Collectors Café by Kontilai to further its
business plan, that Kontilai was strongly incentivized to successfully follow through on

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Collectors’ Cafe business plan since his own money was at risk, and that Kontilai was in fact
confident in the future success of the business because he invested a significant amount of
money into Collectors Café.
C. Material Misrepresentations and Omissions Regarding Dealers and
Inventory on Collectors Café’s Website.

52. Defendants Collectors Café and Kontilai made material misrepresentations and
omissions with respect to the number of dealers and the amount of inventory on Collector Café’s
website.
53. Collectors Café and Kontilai represented to investors in the Collectors Café
Business Plan that Collectors Café would receive 20% from the buyer and 20% from the seller
on all sales made through the Collectors Café auction website.  These commissions from future
sales of collectibles on Collectors Café’s website was the main stated revenue driver for
Collectors Café’s business.
54. Throughout the Collectors Café Offerings, Collectors Café and Kontilai touted
that a large number of dealers were committed to sell a large volume of inventory of collectibles
on Collectors Café’s website:
a. Kontilai stated in a short video designed to promote Collectors Café that was on its
website and emailed to numerous investors that Collectors Café had a “master dealership
made up of hundreds of dealers.”
b. Kontilai represented to investors, including Investor B (orally in or around March 2015),
Investor C (orally in or around February 2015), Investor E (orally in or around August
2016) and Investor I (orally in or around April 2016) that there was billions of dollars of
inventory available on Collectors Café’s website.

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c. Kontilai told some investors, including Investors A (orally in or around October 2014)
and Investor E (orally in or around August 2016), that he had hundreds of dealers signed
up.
d. Kontilai also told investors, including Investor B (orally in or around March 2015) and
Investor E (orally in or around August 2016), that the dealers were signed up under 10
year contracts.
55. These statements were false and misleading.  In reality, in preparation for
Collectors Café’s so-called soft launch in 2016, three dealers had signed a “basic dealer
agreement” that expired within 180 days of execution and did not obligate the dealer to put any
specific quantity of inventory on Collector Café’s website.
56. As of August 2018, only three dealers had ever posted inventory to Collectors
Café’s website, the website was not active at that time and most of the inventory was non-
exclusive inventory from one dealer who also had a physical store in New York City. Inventory
sold through that dealer’s store or on his own website would not result in a commission for
Collectors Café.
57. At the time of these representations, Collectors Café and Kontilai knew that
Collectors Café had not signed up anywhere near the number of dealers they were representing
and further knew that it would have been prohibitively expensive to do so, as Collectors Café
would have been responsible for hiring photographers to take photographs of the dealers’ items,
drafting descriptions and cataloging the items, and then uploading this information onto its
website.

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58. A reasonable investor would have understood from Collector Café’s disclosures
and Defendants’ statements that hundreds of dealers had agreed to post a large amount of
collectibles on Collectors Café’s website worth upwards of a billion dollars, t  hat the anticipated
volume of dealers and inventory committed to the website correlated directly with anticipated
investor profit, and that the increased profits and success would increase the likelihood that a
large company would be interested in acquiring Collectors Café.
59. Each of the above disclosures and representations regarding the volume of dealers
and inventory committed to Collectors Café’s business were false when made, and Defendants
knew, were reckless in not knowing, or should have known, that their statements concerning the
volume of dealers and inventory committed were false and misleading.
60. Defendants omitted to state material facts that were necessary to render their
disclosures and representations regarding the volume of dealers and inventory committed to
Collectors Café’s business not misleading.
61.  T he above misrepresentations and omissions as to the volume of dealers and
inventory committed to Collectors Café’s business were material to investors and potential
investors because, among other things, the volume of dealers and inventory committed to
Collectors Café’s business was directly tied to the future profits and success of the company.  In
fact, it was the expected high volume of sales of collectibles on Collectors Café’s website that
Kontilai touted to bring Collectors Café a profit.

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D.  Material Misrepresentations and Omissions Regarding the Jackie Robinson
Contracts.

62. Defendants Collectors Café and Kontilai made material misrepresentations and
omissions with respect to the ownership and valuation of baseball contracts signed by Jackie
Robinson.
63. Collectors Café and Kontilai represented to investors and potential investors that
(i) Collectors Café owned contracts signed by Jackie Robinson; and (ii) the contracts had been
appraised at $36 million. Defendants representations were false and misleading and omitted
material facts necessary to render these statements not false and misleading, because (i)
Collectors Café did not own a 100% interest in the contracts and was not entitled to all proceeds
from the sale of the contracts; and (ii) there was substantial doubt about the $36 million
valuation, including an appraisal of $10 million that was provided to Collectors Café and
Kontilai.
64. Collectors Café acquired the two baseball contracts signed by Jackie Robinson in
or around 2013: a contract Robinson signed with the minor league Montreal Royals in 1945 and
a contract that he signed with the major league Brooklyn Dodgers in 1947.  Collectors Café
acquired these contracts for approximately $2 million.
65. Collectors Café touted the Jackie Robinson contracts as a major asset of the
company:
a. In the Second Amendment to the Social Media PPM, the Company stated “The Company
successfully concluded its second private capital raise in April of 2010.  The company
has been fully funded to complete its final launch tasks since that date.  It remains in a
strong financial position with a positive cash position as well as having acquired a

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collectibles asset which has been appraised at $36,000,000.  This asset was acquired at an
undervalued price of $2,000,000 and is likely to generate millions of dollars of additional
cash flow upon its liquidation in 2015.”  The Social Media PPM was provided to most
investors who invested after 2014 with at least 100 investors having received it.
b. Kontilai represented to at least two investors –    Investor A (orally in or around October
2014) and Investor F (orally in or around August-September 2014) – that their investment
was “secured” or “protected” by the valuation of the Jackie Robinson contracts.

c. Kontilai led another investor, Investor H, to believe that the value of the Jackie Robinson
contracts protected his investment by describing the contracts as a tangible asset of the
company that had not yet earned revenue
.
66. These statements were false and misleading.  In reality, Collectors Café only
owned a fraction of the Jackie Robinson contracts, was only entitled to a fraction of the proceeds
from the sale of the contracts and the sale of the contracts was expected to be for far less than
$36 million.
67. Defendants representations that Collectors Café owned the Jackie Robinson
contracts were false and misleading and omitted material facts, because Collectors Café did not
own a 100% interest in the contracts and was not entitled to 100% of the proceeds from their
sale:
a. In connection with the acquisition of these contracts in 2013, Collectors Café entered into
six “Series A Notes” (as amended) that totaled $4 million and stated that the loan
proceeds would be used for acquisition of the contracts and “working capital purposes.”

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b. Under the terms of the Series A Notes, the holders of those notes are entitled to a return
of 50% of any net proceeds from the sale of the Jackie Robinson contracts.  Net proceeds
is calculated as (a) the purchase price paid by an unrelated third party buyer for the
contracts less (b) the payoff amount of the Series A Notes less (c) without duplication
any principal, interest, default interest, fees and costs already paid under the Series A
notes less (d) any reasonable expenses associated with the contracts, but excluding their
purchase price.

c. The following year, in 2014, Collectors Café entered into two Series B Secured
Promissory Notes (the “Series B Notes”) that totaled $2 million, which were payable
upon the sale of the Jackie Robinson contracts.

d. Once Collectors Café receives its portion of the net proceeds, it must repay the Series B
Notes.

e. In addition to the Series A Notes and Series B Notes, Collectors Café has contracted to
give three other parties a portion of the proceeds.

68. Additionally, by no later than January 20, 2016, Defendants representations about
the $36 million valuation were false and misleading and omitted material facts, because Kontilai
had credible information indicating that the contracts were worth much less than $36 million:
a. On January 20, 2016, Kontilai received an Insurance Appraisal Report regarding the two
Jackie Robinson contracts that was prepared by a confidential broker, authenticator and
appraiser using final bids from several auction houses specializing in sports history and
reference to high value historic documents.

b. This report values the Jackie Robinson contracts at $10 million.

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c. The confidential broker, authenticator and appraiser disclosed to Kontilai that he was
receiving pushback for even a $10 million valuation.

69. Neither Collectors Café nor Kontilai disclosed to investors or prospective
investors that the $36 million valuation likely overvalued the contracts, or that on or about
January 20, 2016, that they received an Insurance Appraisal Report valuing the Jackie Robinson
contracts for only $10 million, or that they were told that there was resistance to even a $10
million valuation.
70. On information and belief, Kontilai was aware that the $36 million appraisal of
the Jackie Robinson contracts overvalued the asset by a significant amount at the time of the
appraisal and prior to receiving the $10 million appraisal.  In fact, the overvaluation of the Jackie
Robinson contracts was not only confirmed by the subsequent $10 million appraisal described
above, but further borne out when the individual who appraised the contracts for $36 million
offered to buy the contracts for less than $8 million, which Defendants appear to have accepted.
The final documents for this sale were recently circulated to all parties for execution.  Because of
Collector Café’s fractional ownership and duty to repay promissory notes, it is expected to
receive less than $2 million.
71. A reasonable investor would have understood from Collector Café’s and
Kontilai’s disclosures and statements about the ownership interest of the Jackie Robinson
contracts that Collectors Café owned 100% of the contracts, were entitled to 100% of the
proceeds from any sale of the contracts, and expected to receive $36 million upon the sale of the
contracts.

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72. Each of the above disclosures and representations regarding the ownership and
valuation of the Jackie Robinson contracts were false when made, and Defendants knew, were
reckless in not knowing, or should have known, that their statements concerning the ownership
and valuation of the Jackie Robinson contracts were false and misleading.
73. Defendants omitted to state material facts that were necessary to render their
disclosures and representations regarding the ownership and valuation of the Jackie Robinson
contracts not false and misleading.
74.  The above misrepresentations and omissions as to the ownership and valuation
of the Jackie Robinson contracts were material to investors and potential investors because,
among other things, the value of Collectors Café’s assets safeguarded investors against the
potential failure of the company, and because it would be important to investors to understand
that Collectors Café would receive substantially less than $36 million upon the sale of the
contracts.

E. Collectors Café and Kontilai Are Each Liable for Their Misstatements and
Omissions.

75. All of the misrepresentations and omissions detailed above were made in
connection with the offer, purchase, or sale of securities issued by Collectors Café.
76. Collectors Café and Kontilai both obtained money by means of the
misrepresentations and omissions detailed above.
77. Kontilai made or directed each misrepresentation and omission detailed above.
78. Kontilai determined the content of and had ultimate authority over the PPMs, as
well as marketing materials, internet websites, and other documents and emails used to solicit

22

prospective investors. Kontilai had sole control of Collectors Café, and he personally made the
oral representations detailed above.
79. Similarly, Collectors Café made the representations Kontilai made. Kontilai had
authority to make representations on behalf of Collectors Café, and did in fact make
representations on behalf of Collectors Café.
80. At all times, Collectors Café and Kontilai acted with the requisite scienter.
III. Collectors Café and Kontilai Engaged in a Scheme to Defraud Investors.
81. From no later than April 2014 through the present, Collectors Café and Kontilai
engaged in a scheme to defraud the Collectors Café investors, and engaged in numerous acts,
practices or courses of business that defrauded the Collectors Café investors. Acts in furtherance
thereof include the false and misleading statements, omissions, and other conduct described
above, and the acts described below.
A.  Concealment of Misappropriation of Investor Funds
82. Despite the representations that Collectors Café would use investor money to fund
specific aspects of the business and did not allow for Kontilai to use investor funds to pay
personal expenditures and fund his lavish lifestyle, and despite Kontilai’s representations that he
was “very frugal” and was not even taking a salary, Kontilai misappropriated at least $6.1
million from Collectors Café in the form of cash withdrawals and transfers to Kontilai’s personal
accounts. Kontilai used these funds for personal expenses.

83. Kontilai attempted to conceal many of these transfers by running investor funds
through bank accounts of his associate.

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84. In or around 2012, Kontilai asked his associate, G.H., to set up a bank account in
her name.  Kontilai told G.H. that he planned to transfer money into the account and then direct
her to withdraw money from the account in cash and provide it to him.
85. Kontilai instructed G.H. that, if a bank employee asked questions about the cash
withdrawals, G.H. was to tell the bank employee that she was a consultant to Collectors Café and
that the money was for the purchase of collectibles, which could be acquired at a better price if
cash was used.

86. This instruction was intended to conceal, and further, Defendants’ fraudulent
scheme because Collectors Café and Kontilai knew at the time of instructing G.H. to open the
bank accounts, through the time of directing the withdrawals of cash, that Collectors Café would
not purchase collectibles with the funds.

87. G.H. opened a new bank account at Kontilai’s instruction on March 14, 2012.
88. From 2012 to 2014, Kontilai obtained investors’ money in the form of cash in the
following manner:

a. Kontilai directed transfers of funds invested with Collectors Café to G.H.’s accounts;
b. Shortly after a deposit of investor money into G.H.’s account, G.H. withdrew the same
amount by visiting bank branches in person. Kontilai accompanied G.H. in nearly every
instance when she withdrew the money.
c. Kontilai directed G.H. to immediately give the cash to Kontilai after it was withdrawn
and G.H. complied.

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d. Between approximately the end of 2012 through March 2014, approximately $3.3 million
was pilfered in this manner. Between April 1, 2014 and December 20, 2018, Collectors
Café transferred approximately $2.1 million to Kontilai via G.H’s accounts.
89. In or around July 2018, Kontilai told G.H. that he again needed help to transfer
cash to himself from Collectors Café. Kontilai told his associate that he needed the money to
maintain his lifestyle and that because of an investigation by the SEC, it would not look good if
Kontilai withdrew the money himself.

90. On or about July 10, 2018, Kontilai, through Collectors Café, transferred
$250,000 to G.H.’s personal account (“Bank Account 1”).

91. On or about July 11, 2018, G.H. obtained a cashier’s check from the same bank
account for $250,000. G.H. delivered the check to Kontilai at his apartment in New York City.
92. On or about July 11, 2018, Kontilai requested that G.H. use her account from
another bank (“Bank Account 2”) to receive transfers from Collectors Café. On or about the
same day, at the direction of Kontilai, the $250,000 cashier’s check from Bank Account 1 was
deposited in Bank Account 2.

93. Kontilai also instructed G.H. to open an account at a separate bank, (“Bank
Account 3”) to receive transfers from Collectors Café.

94. On or about July 11, 2018, in addition to the $250,000 cashier’s check deposited
into Bank Account 2, Kontilai transferred $375,000 into Bank Account 2 and an additional
$375,000 into Bank Account 3. These funds, belonging to Collectors Café, were subsequently
misappropriated by Kontilai.

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95. In addition to withdrawing cash at the direction of Kontilai from the accounts to
which he had transferred Collectors Café funds, Kontilai instructed G.H. to use the money he had
transferred into the accounts to purchase gold bars online that were delivered to her apartment in
New York.
96. At Kontilai’s direction, G.H. turned over all the gold bars to Kontilai.
97. Kontilai then sold the gold bars for cash.
98. Kontilai also used Collectors Café’s credit cards and transfers from Collectors
Café’s account for personal expenses.
99. These charges include rent on an oceanfront condo in Miami, tuition at a private
school in Las Vegas, expenses at gentleman’s clubs, stays at a luxury resort in Miami over New
Year’s Eve, and various personal items at high-end stores such as Chanel, Louis Vuitton, Saks
Fifth Avenue, Cartier, and Rolex.
100. Kontilai never disclosed to any of his investors or prospective investors that
money he received from the sale of Collectors Café securities would be used for anything other
than the Collectors Café business, much less that he would use investor money to fund his lavish
lifestyle.
B.  Fabrication of Documents
101. In furtherance of his scheme to misappropriate and misuse investor money, and to
conceal and obfuscate his scheme from the SEC and others, Kontilai fabricated multiple
documents with the intent to create the appearance that transfers from Collectors Café to himself
were legitimate.

26

102. On May 14, 2018, Kontilai produced to the SEC a fabricated employment
agreement that purportedly provided Kontilai the right to a salary from Collectors Café.
103. The purported employment agreement provided to the SEC was backdated, and
contains a forged signature of G.H. (who was involved in the cash transfers as described above)
that misidentified her as “Chairman of the Board.”
104. G.H. never signed this purported employment agreement and never served as
“Chairman of the Board.”
105. Kontilai knew the copy of the purported employment agreement produced to the
SEC was fabricated at the time he produced it to the SEC.
106. Kontilai produced the fabricated copy of the purported employment agreement to
the SEC with the intent to mislead the SEC and others into believing that Collectors Café was
contractually obligated to pay funds to Kontilai.
107. Kontilai also produced to the SEC a copy of a loan agreement purporting to
document a $5 million loan from Kontilai to Collectors Café.  That loan agreement was
purportedly signed by Kontilai and G.H., and again misidentified G.H. as Chairman of the
Board.
108. Kontilai attached to the loan agreement a bank statement purporting to reflect the
$5 million deposit into a Collectors Café’s account in an effort to corroborate his claim that he
leant Collectors Café $5 million.
109. The Collectors Café bank statement produced to the SEC is a fabricated
document. The actual bank statement reflects a deposit of $1,000 into the account of Collectors

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Café, not $5 million. Kontilai altered the bank statement and provided the altered version to the
SEC.
IV. Kontilai and Collectors Café Took Actions to Impede Investors from
Communicating with SEC S taff.

110. In 2015 and 2017 certain investors asserted alleged that Collectors Café and
Mykalai Kontilai were engaged in fraud.
111. Collectors Café and Mykalai Kontilai responded to allegations of fraud by, among
other things, drafting, creating, and signing a 2015 Stock Purchase Agreement (“2015 SPA”) and
a 2017 Settlement Agreement (“2017 Settlement Agreement”) that contained explicit provisions
impeding investors from communicating with the SEC.
A. Collectors Café and Mykalai Kontilai Paid Investors Money on Condition
That They Refrain From Communicating With Law Enforcement.

112. In 2015, Collectors Café investors communicated concerns about their
investments and the progress of Collectors Café in relation to claims by Kontilai that the
company would launch in early 2015.
113. In an email sent to Kontilai on July 30, 2015, one of these investors confronted
Kontilai about representations he made about the company with, among other things, the
following: “What happened to that 25 million artifact? Did you get a buyer? Why do you say one
thing and not really follow through? .... You are not a person of integrity. You are not a person
of honesty. You don’t tell the truth.”
114. In October 2015, Kontilai arranged for those investors’ shares in Collectors Café
ostensibly to be repurchased by his sister-in-law.  The investors sold their shares of Collectors

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Café stock purportedly to Kontilai’s sister-in-law for a purchase price of $50,000 pursuant to the
2015 SPA, dated October 8, 2015.
115. Collectors Café was a party to the 2015 SPA, and Kontilai signed the agreement
on behalf of the company.
116. The 2015 SPA states the following:
“[Investors]  .  .  .  warrant  and  affirm  that  they  have  not, directly  or
indirectly,  individually,  collectively  or  otherwise,  as  of  the  date  of
execution of this Agreement, contacted any third-party, including but not
limited  to  governmental  or  administrative  agencies  or  enforcement
bodies,   for   the   purpose   of   commencing   or   otherwise   prompting
investigation or other action relative to [Collectors Café] or the subject
herein.  [Investors] ... further warrant and affirm that. . . they will
not,  directly  or  indirectly,  individually,  collectively  or  otherwise,
contact any third-party, including, but not limited to governmental
or administrative agencies or enforcement bodies, for the purpose of
commencing  or  otherwise  prompting  investigation  or  other  action
relative to [Collectors Café] or the subject matter herein.  The parties
agree  that  the  terms  of  this  provision  are  not  designed  or  intended  to
accomplish  any  improper  purpose,  but  rather,  are  included  as  material
consideration in light of the time and expense which could be incurred
by  all  parties,  if  investigation  or  other  third-party  action  were  to  arise
regarding the subject matter herein....” (Emphasis added.)

117. The SEC is a governmental agency that investigates the type of misconduct raised
by the investors prior to execution of the 2015 SPA.
B. Collectors Café and Mykalai Kontilai Agreed To Resolve Allegations of
Fraud on Condition That Investors Refrain From Communicating With The
SEC.

118. In March 2017, two investors sent Collectors Café a letter alleging that Collectors
Café made material misrepresentations and omissions that supported claims under the antifraud

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provisions of the federal securities laws, and sought return of their investment from Collectors
Café, interest, and attorney fees.
119. Collectors Café did not repay the investors, and on May 18, 2017, the investors
filed a lawsuit against Collectors Café alleging securities fraud, among other things (the “2017
Investor Case”).
120. On June 26, 2017, Collectors Café, Kontilai, and the two investors entered into a
confidential settlement agreement to resolve the 2017 Investor Case (“Settlement Agreement”).
121. The Settlement Agreement states:
“The Shareholders, for themselves and their counsel and advisors,
confirm that they are not aware of, and have not had to date, and will
not initiate on a going forward basis, any communications with
any regulatory agencies such as the United States Securities and
Exchange  Commission  or  any  other  Federal,  State,  or  Local
governmental  agency  concerning  the  matters  related  to  this
Agreement.   Nothing   herein   would   prevent   the   parties   from
responding  to,  and/or  fully  complying  with,  a  subpoena  or  other
governmental  and  or  regulatory  compulsory  process.”  (Emphasis
added.)

122. The Settlement Agreement provided for the return of the investors’ principal
investment in Collectors Café in three payments over a year: $750,000 by June 27, 2017;
$384,375 by December 27, 2017; $393,750 by June 27, 2018.
123. On June 27, 2017, Kontilai made the initial payment of $750,000 to the investors.
124. At or around the time the parties were executing the Settlement Agreement, SEC
staff contacted the investors’ counsel to obtain information regarding their complaint in the 2017
Investor Case.
125. After the parties executed the Settlement Agreement and after the initial payment
to investors, the investors’ counsel responded to multiple requests from the SEC staff.

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126. The investors’ counsel reported to SEC staff that his clients’ case against Kontilai
and Collectors Café had been resolved and that a confidentiality agreement prevented his clients
from speaking to SEC staff voluntarily. The investors did not provide the SEC information until
after the SEC served their counsel with subpoenas.
127. By letter dated January 4, 2018 from counsel for Collectors Café and Kontilai to
the investors’ counsel, Collectors Café and Kontilai stated that they “have reason to believe” that
one or more of the investors or their counsel had been in communication with the SEC about
Collectors Café and Kontilai.
128. In the January 4 letter, Collectors Café and Kontilai claimed that the provision
prohibiting communications with the SEC was a “material terms [sic] of the Settlement
Agreement and pivotal to [Collectors Café and Kontilai] settling the dispute ... and entering into
the Settlement Agreement and paying the compensation outlined” in the Settlement Agreement.
129. On April 26, 2019, Collectors Café and Kontilai filed a lawsuit against the
investors (“2019 Lawsuit”).
130. In the 2019 Lawsuit, Collectors Café and Kontilai asserted claims for fraud,
breach of contract, unjust enrichment, intentional interference with contractual relations, civil
conspiracy, and breach of implied covenant of good faith and fair dealing.
131. Each of the claims asserted in the 2019 Lawsuit are based on the factual allegation
that the investors communicated with the SEC about Collectors Café and Kontilai.
132. Collectors Café and Kontilai claimed that contact with the SEC could have
jeopardized Collectors Café’s entire business:
Due  to  Defendants’  actions,  some  of  Plaintiffs’  investors  have  been
contacted  by  the  SEC  and  there  is  a  potential  that  the  entire  enterprise

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developed since 2007 could be jeopardized, with the entire value of the
enterprise  at  risk,  including  the  initial  investments  of  approximately
$30,000,000 and the current stock valuation which far exceed the value
of the initial investments.

133. Collectors Café and Kontilai requested punitive and compensatory damages in
their complaint.
134. In a phone call with all investors on June 18, 2019, Kontilai repeatedly referenced
this lawsuit to the investors, touting the damages that he had claimed and that he intended to
amend this lawsuit to include others whom he viewed as the source of the company’s troubles.
135. Collectors Café’s and Kontilai’s 2019 Lawsuit was dismissed without prejudice
on September 26, 2019, because Collectors Café and Kontilai failed to effect service on the
investors.
136. As a result of the above, Collectors Café and Kontilai took actions to impede
investors from communicating directly with SEC staff about a possible securities law violation,
including by enforcing and threatening to enforce confidentiality agreements.
V. Mykalai Kontilai and Collectors Café Continue to Make Misrepresentations and
Omissions to Investors.

137. After the SEC filed its complaint, on June 18, 2019, Collectors Café and Mykalai
Kontilai held a telephonic meeting that was open to investors. Numerous Collectors Café
investors participated in the call.
138. During the call Defendants made efforts to convince investor-victims they had not
been victimized by Defendants’ fraud in order to persuade those victims to refrain from
demanding return of their investments and to support Defendants’ plan to request a release of

32

money from the asset freeze purportedly to continue business operations. Kontilai characterized
the allegations in the complaint in this case as “all falsehoods, all lies, all bullshit.”
139. Collectors Café and Mykalai Kontilai then made numerous false and misleading
statements, and omitted material facts, during this June 18 call with investors.
140. First, Kontilai and Collectors Café stated that the SEC wrongfully filed its lawsuit
at least in part because the SEC did not have – and purposefully did not seek to obtain – all of
the company’s bank statements for periods prior to April 2014. Kontilai stated, with counsel of
record on the call, that the SEC did not subpoena “the first seven years of records,” including
“years that [Kontilai] put money in the company [in] 2007, ’8, ’9, [and] ’10,” and that “[the
SEC] intentionally did not subpoena all of the years of bank records that show the money that I
put in.”
141. The implication of Kontilai’ s statements was that these bank statements would
show that Kontilai loaned the company money and, as a result, his personal use of company
money constituted partial repayment of those loans and therefore was a legitimate company
obligation.
142. These statements are false and misleading because, among other things, Kontilai
and Collectors Café omitted the material facts that (i) no bank statement will support the claim
that Kontilai was entitled to the company’s money because Kontilai never loaned the company
the amounts that he purports to claim he loaned; (ii) Kontilai and Collectors Café fabricated
documents to evidence purported loans because they know no such loans were ever made;
(iii) the company’s PPMs told potential investors throughout the life of the company that the
company owed no debts; (iv) the SEC requested by subpoena to the company all of its bank

33

records dating back to 2008 and all records related to any claim that transfers from the company
to Kontilai were legitimate; and (v) prior to the phone call, the SEC produced to Defendants
copies of bank records it received pursuant to subpoenas, which included all statements from the
Bank of America account Kontilai used to fabricate a bank statement from the time the account
opened in June 2007 to the time it closed in June 2008.
143. During the June 18 call, Kontilai also stated that their delivery and use of a
fabricated employment agreement to the SEC was the fault of G.H. and their previous counsel.
Collectors Café and Kontilai stated that G.H. provided Kontilai with copies of his employment
agreement, a promissory note, and a bank statement prior to his testimony in the SEC’s
investigation.
144. These statements falsely implied that G.H. or the Defendants’ previous counsel
had fabricated Kontilai’s employment agreement, promissory note, and bank statement. These
statements were false because G.H. never provided Kontilai with copies of these purported
documents and because these documents never existed.  Collectors Café and Kontilai knew at
all relevant times that these documents never existed.
145. In fact, Kontilai and Collectors Café knowingly fabricated the documents they
claim G.H. provided them, including the employment agreement, which purported to
memorialize terms of agreements that never existed.
146. During the June 18 call, when confronted with the claim from a participant on the
call that the company does not own a tangible asset, Kontilai and Collectors Café stated that the
company has “a massive intellectual property portfolio with close to 100 trademarks pending
patent authenticity insurance.”

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147. This statement is false and misleading because the company’s patent applications
were abandoned no later than June 22, 2018. The statement also is misleading because Kontilai
and Collectors Café omitted the fact that the company has been dormant for over 18 months
and, therefore, could not have been using any valid trademarks or policing those marks during
that time. Disclosure of these facts was necessary to correct the impression of the Defendants’
statement that the company had a valuable intellectual property portfolio.
148. During the June 18 call, Kontilai also referenced a claim that Collector’s Café has
“hundreds of dealers committed to putting inventory on the [Collector’s Café] [web]site”
claiming it to be true.
149. This statement is false and misleading because, as outlined in paragraphs 52-61,
Collector’s Café did not have hundreds of dealers committed to putting inventory on its website,
in fact, as of August 2018, only three dealers had ever posted inventory to Collectors Café’s
website, the website was not active at that time and most of the inventory was non-exclusive
inventory from one dealer who also had a physical store in New York City.
150. Kontilai also stated on the call that two things need to happen for the company to
use proceeds from the sale of the Jackie Robinson contract: (1) the assets need to be unfrozen
(something for which Kontilai and Collectors Café were soliciting support from investors); and
(2) the Los Angeles Dodgers need to agree to the sale.
151. This statement is misleading because Kontilai and Collectors Café omitted the
material facts that the Los Angeles Dodgers claim to own the contracts, they refuse to agree to
the sale, and the only potential buyer known at the time of the investor call would not proceed
with the sale unless and until the claim asserted by the Los Angeles Dodgers no longer clouds

35

title to the contracts. Omission of these facts left the false impression that an actual sale is
imminent but for the order freezing Defendants’ assets.
152. The purpose of the June 18 call, executed through Defendants’ misstatements and
omissions, was to lull investor-victims into falsely believing that they had not been victimized;
that the SEC had engaged in misconduct and brought false allegations of fraud against
Defendants; that Collector’s Café had value and assets, which would be lost if investor-victims
did not support Defendants’ request to the Court that it unfreeze assets; and that investor-
victims could still expect a return on their investment if the Court unfroze assets.
VI. Veronica Kontilai Received Ill-Gotten Gains.
153. Veronica Kontilai has not earned income in over 30 years.
154. Veronica Kontilai has received no income since, at least, 2007.
155. Veronica Kontilai has not filed tax returns since, at least, 2007.
156. Veronica Kontilai has provided no recognizable consideration to Collectors Café,
such as services, employment or otherwise.
157. Mykalai Kontilai has had no employment or material sources of income other
than his work for Collectors Café since 2007.
158. Since April 1, 2014, Veronica Kontilai received more than $275,000 in cash
deposits to her personal bank accounts. These funds belonged to Collectors Café and Veronica
Kontilai has no legitimate claim to the cash deposited into her personal bank accounts.
159. The cash deposited into Veronica Kontilai’s personal bank accounts are proceeds
from the fraud alleged above.

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160. Since April 1, 2014, Veronica Kontilai received at least $14,653 from Mykalai
Kontilai’s bank accounts.
161. Veronica Kontilai has no legitimate claim to the funds transferred into her
personal bank accounts from the accounts of Mykalai Kontilai.
162. The funds transferred into Veronica Kontilai’s personal bank accounts from the
accounts of Mykalai Kontilai are proceeds from the fraud alleged above.
163. Veronica Kontilai spent at least $23,622 on Collectors Café’s credit cards.
164. The credit card charges by Veronica Kontilai on Collectors Café’s credit cards
were used to make, among other things, payments to a private school, rental car companies,
taxis, movies, restaurants, and storage units.
165. Veronica Kontilai had no legitimate right to use Collectors Café’s credit cards to
pay for her personal expenses.
166. The property acquired and other expenses incurred by Veronica Kontilai through
use of Collectors Café’s credit cards are proceeds from the fraud alleged above.
167. Mykalai Kontilai used Collectors Café funds to purchase custom suits for
Veronica Kontilai.
168. Veronica Kontilai has no legitimate claim to the custom suits purchased by Mr.
Kontilai.
169. The custom suits are proceeds from the fraud alleged above.
170. As a result of the above, Veronica Kontilai benefited directly from Collectors
Café’s and Mykalai Kontilai’s fraudulent conduct and she would be unjustly enriched if not

37

compelled to disgorge the funds received or expended on her behalf as a direct result of the
misconduct.
FIRST CLAIM FOR RELIEF
Fraud (Misstatements and Omissions): Section 10(b) of the
Exchange Act and Rule 10b-5(b)
(Collectors Café and Mykalai Kontilai)

171. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
172. Collectors Café and Kontilai, directly or indirectly, acting with scienter, by use of
the means or instrumentalities of interstate commerce, or of the mails, or of a facility of a
national securities exchange, in connection with the purchase or sale of a security, made untrue
statements of material fact or omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading.
173. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly,
violated and, unless restrained and enjoined, will again violate Section 10(b) of the Exchange
Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b-5] thereunder.
SECOND CLAIM FOR RELIEF
Fraud (Misstatements and Omissions): Section 17(a)(2) of the
Securities Act
(Collectors Café and Mykalai Kontilai)

174. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
175. Collectors Café and Kontilai, directly or indirectly, in the offer or sale of
securities, by use of the means or instruments of transportation or communication in interstate
commerce or by use of the mails, acting with the requisite state of mind, obtained money or

38

property by means of an untrue statement of material fact or omission to state a material fact
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading.
176. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly,
violated and, unless restrained and enjoined, will again violate Section 17(a)(2) of the Securities
Act [15 U.S.C. § 77q(a)(2)].
THIRD CLAIM FOR RELIEF
Fraud (Scheme): Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c)
(Collectors Café and Mykalai Kontilai)

177. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
178. Collectors Café and Kontilai, directly or indirectly, acting with scienter, by use of
the means or instrumentalities of interstate commerce, or of the mails, or of a facility of a
national securities exchange, in connection with the purchase or sale of a security: employed
devices, schemes, or artifices to defraud; or engaged in acts, practices, or courses of business
which operated or would operate as a fraud or deceit upon another person.
179. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly,
each violated, and, unless restrained and enjoined, will again violate Section 10(b) [15 U.S.C.
§ 78j(b)] of the Exchange Act and Rule 10b-5(a) and (c) [17 C.F.R. § 240.10b-5(a) and (c)]
thereunder.

39

FOURTH CLAIM FOR RELIEF
Fraud (Scheme): Section 17(a)(1) and (3) of the Securities Act
(Collectors Café and Mykalai Kontilai)

180. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
181. Collectors Café and Kontilai, directly or indirectly, in the offer or sale of
securities, by use of the means or instruments of transportation or communication in interstate
commerce or by use of the mails, acting with the requisite state of mind, employed a device,
scheme, or artifice to defraud and engaged in transactions, practices, or a course of business
which operated or would operate as a fraud or deceit upon purchasers.
182. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly,
violated and, unless restrained and enjoined, will again violate Section 17(a)(1) and (3) of the
Securities Act [15 U.S.C. § 77q(a)(1) and (3)].
FIFTH CLAIM FOR RELIEF
Impeding: Rule 21F-17 of the Exchange Act
(Collectors Café and Mykalai Kontilai)
183. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
184. Collectors Café and Kontilai took actions to impede individuals from
communicating directly with the SEC staff about a possible securities law violation, including by
enforcing and threatening to enforce confidentiality agreements with respect to such
communications.

40

185. By virtue of the foregoing, Collectors Café and Kontilai violated and, unless
restrained and enjoined, will again violate Rule 21F-17 of the Exchange Act [17 C.F.R.
§ 240.21F-17].
SIXTH CLAIM FOR RELIEF
Equitable Disgorgement
(Relief Defendant Veronica Kontilai)
186. The SEC realleges and incorporates by reference paragraphs 1 through 170, as
though fully set forth herein.
187. Relief Defendant Veronica Kontilai obtained money, property and assets which
are the proceeds, or are traceable to the proceeds, of the violations of the securities laws by

Defendants Collectors Café’s and Mykalai Kontilai.
188. Relief Defendant Veronica Kontilai received gifts and other assets purchased
from the proceeds, or that are traceable to the proceeds, of the violations of the securities laws by

Defendants Collectors Café’s and Mykalai Kontilai.
189. Relief Defendant Veronica Kontilai received these funds and assets under
circumstances in which it is not just, equitable, or conscionable for her to retain the funds or
assets, and therefore has been unjustly enriched.
RELIEF SOUGHT
WHEREFORE, the SEC respectfully requests that this Court:
I.
Find that Defendants Collectors Café and Mykalai Kontilai violated the securities laws
and rules promulgated thereunder as alleged against them herein;

41

II.
Enter an Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, preliminarily and permanently restraining and enjoining the Defendants Collectors
Café and Mykalai Kontilai from violating the laws and rules alleged against them in this
Amended Complaint;
III.
Order Defendants Collectors Café and Mykalai Kontilai and Relief Defendant Veronica
Kontilai to disgorge all of the ill-gotten gains from the violations alleged in this Amended
Complaint, and order them to pay prejudgment interest thereon;
IV.
Order Defendants Collectors Café and Mykalai Kontilai to pay civil money penalties
pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)]; and
V.
 Grant such other and further relief as this Court deems just and proper.
JURY DEMAND
The SEC demands a trial by jury on all claims so triable.

Dated: November 4, 2019

      /s/ Terry R. Miller
Terry R. Miller (pro hac)
Mark L. Williams (pro hac)
Attorneys for Plaintiff
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

TERRY R. MILLER 
[email protected] 
MARK L. WILLIAMS 
[email protected] 
SECURITIES AND EXCHANGE COMMISSION 
1961 Stout Street, 17th Floor 
Denver, Colorado 80294 
(303) 844-1000 
 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

 
 
UNITED STATES SECURITIES AND EXCHANGE 
COMMISSION, 
 

Plaintiff, 
 

- against - 
 
COLLECTOR’S COFFEE, INC. (d/b/a 
COLLECTORS CAFÉ), and MYKALAI KONTILAI,  
 

Defendants, and 
 

VERONICA KONTILAI, 
 

Relief Defendant 
 

 
19-cv-04355-LGS-GWG 

ECF CASE 
 

AMENDED COMPLAINT  
 

JURY TRIAL  
DEMANDED 

 
 

 
 

Plaintiff, United States Securities and Exchange Commission (the “SEC”), for its 

Amended Complaint against defendants Collector’s Coffee, d/b/a Collectors Café (“Collectors 

Café”), Mykalai Kontilai (together with Collectors Café, the “Defendants”) and relief defendant 

Veronica Kontilai, alleges: 

SUMMARY OF ALLEGATIONS 

1. Mykalai Kontilai, through his entity Collectors Café, raised millions of dollars by 

representing to investors that they would use the funds to develop a website for the auction of 

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mailto:[email protected]


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collectibles such as sports memorabilia, as well as an affiliated social network and television 

show. 

2. Rather than using funds as the Defendants represented to investors, Kontilai 

misappropriated more than $6.1 million to fund his lavish lifestyle, funneling approximately $1.9 

million to his personal bank accounts, and withdrawing another $4.2 million in cash. Kontilai 

actively tried to conceal his misappropriation from investors by funneling their money through 

his associate’s bank accounts and from the SEC staff by fabricating documents. 

3. In addition to these cash withdrawals and transfers, Kontilai also misappropriated 

investor funds to purchase a variety of luxury goods and services (including from Chanel, Louis 

Vuitton, and Cartier), to pay gambling expenses, and to rent an oceanfront condo in Miami. 

4. Additionally, Collectors Café and Kontilai misrepresented to investors numerous 

material facts about Collectors Café’s business, including Kontilai’s improper use of investor 

funds, Kontilai’s personal investment in Collectors Café, the number of dealers signed up to sell 

inventory on its online platform, and Collectors Café’s interest in certain assets, including two 

original contracts signed by the legendary Jackie Robinson. 

5. As a result of Collectors Café and Kontilai’s fraudulent conduct they were able to 

raise approximately $23 million from at least 140 investors since April 2014, at least one-quarter 

of which Kontilai misappropriated and used for personal expenses.  

6. While engaging in this fraudulent conduct, Collectors Café and Kontilai took 

actions to prevent investors from communicating directly with SEC about their securities laws 

violations. In at least two instances, Collectors Café and Kontilai attempted to resolve investor 

allegations of wrongdoing against them by conditioning the return of investor money on the 

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agreement of the investors to confidentiality clauses prohibiting the investors from 

communicating with law enforcement, including the SEC, about the alleged securities law 

violations. In one of these instances, Collectors Café and Kontilai even went so far as to file a 

lawsuit claiming that the victims breached the confidentiality provision by communicating with 

SEC staff about possible securities law violations. Collectors Café and Kontilai sought punitive 

and compensatory damages in that action, including repayment of the money paid to settle 

claims of securities fraud. Collectors Café and Kontilai then flaunted to other investors the fact 

that they had sued investors for communicating with the SEC. 

7. Following the filing of the SEC’s action in May 2019, Collectors Café and 

Kontilai have continued to misrepresent to investors material facts about Collectors Café’s 

business and the reasons why Kontilai took money from the company for personal expenses, 

including continuing to tell investors that he loaned Collector’s Café millions of dollars in the 

late 2000s when, in reality, he never lent the company money. 

8. Finally, Relief Defendant Veronica Kontilai received illicit funds from Collectors 

Café and Kontilai to which she has no legitimate claim.  Specifically, she received from 

Collectors Café and Mykalai Kontilai over $300,000 of investor funds that she used for personal 

expenses.  

SUMMARY OF VIOLATIONS 

9. As a result of the conduct described herein, Defendants Collectors Café and 

Kontilai obtained money or property on the basis of false and misleading statements and 

omissions, and made material false and misleading statements and omissions. Accordingly, 

Collectors Café and Kontilai have violated and, unless restrained and enjoined, will continue to 

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violate Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)] and Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. § 240.10b-5(b)]. 

10. As a result of the conduct described herein, Defendants Collectors Café and 

Kontilai engaged in a scheme to defraud and have violated and unless restrained and enjoined 

will continue to violate Section 17(a)(1) and (3) of the Securities Act [15 U.S.C. § 77q(a)(1) and 

(3)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and (c) 

thereunder [17 C.F.R. § 240.10b-5(a) and (c)]. 

11. As a result of the conduct described herein, Defendants Collectors Café and 

Kontilai took actions to impede individuals from communicating directly with SEC staff about 

possible securities law violations, including by enforcing and threatening to enforce 

confidentiality agreements with respect to such communications.  These defendants have thereby 

violated, and unless restrained and enjoined will continue to violate, Rule 21F-17 of the 

Exchange Act [17 C.F.R. § 240.21F-17]. 

12. As a result of the conduct described herein, Veronica Kontilai received illicit 

proceeds from the fraud of Collectors Café and Mykalai Kontilai to which she has no legitimate 

claim and under circumstances in which it is not just, equitable, or conscionable for her to retain 

the funds or assets, and therefore has been unjustly enriched. 

NATURE OF THE PROCEEDINGS AND REQUESTED RELIEF 

13. The SEC brings this action pursuant to the authority conferred upon it by Section 

20(b) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b)] and Section 21(d) of 

the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78u(d)]. The SEC seeks 

preliminary and permanent injunctions against Collectors Café and Mykalai Kontilai, enjoining 

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them from future violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], 

Rules 10b-5 [17 C.F.R. § 240.10b-5] and 21F-17 [17 C.F.R. § 240.21F-17] promulgated 

thereunder and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], disgorgement of all ill-

gotten gains from activity set forth in this Amended Complaint, together with prejudgment 

interest, and civil penalties pursuant to Section 20(d)(1) of the Securities Act [15 U.S.C. § 

77t(d)(1)] and Section 21(d)(3)(A) [15 U.S.C. § 78u(d)(3)(A)] of the Exchange Act.   

14. The SEC seeks a final judgment ordering Veronica Kontilai to disgorge ill-gotten 

gains held in her accounts or otherwise received by her, and to pay prejudgment interest thereon. 

JURISDICTION AND VENUE 

15. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 

22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 21(d), and 27 

of the Exchange Act [15 U.S.C. §§ 78u(d), and 78aa]. 

16. Defendants, directly or indirectly, made use of the means or instruments of 

transportation or communication in interstate commerce, the means and instrumentalities of 

interstate commerce, or of the mails, in connection with the acts, practices, and courses of 

business set forth in this Amended Complaint. 

17. Venue lies in this Court pursuant to Section 22(a) of the Securities Act and 

Section 27(a) of the Exchange Act. Defendant Collectors Café is a private company founded, 

owned, and controlled by Defendant Kontilai with a principal place of business in this District, 

and many of the acts, practices, transactions, and courses of business alleged in this Amended 

Complaint occurred within this District. 

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18. On or about April 1, 2019, the SEC, Collectors Café and Mykalai Kontilai entered 

into a tolling agreement tolling conduct back to April 1, 2014.  

DEFENDANTS 

19. Collector’s Coffee (d/b/a Collectors Café), is a private company founded, owned, 

and controlled by Kontilai with its principal place of business in New York, New York. The 

Company was incorporated in California on or about May 14, 2007 (as Ultimate Collector Inc.), and 

subsequently reorganized as a Nevada C corporation via merger on or about February 22, 2008.   

20. Mykalai Kontilai (f/k/a Michael Contile), age 49, resides in Las Vegas, Nevada. 

He is the founder, president, and chief executive officer of Collectors Café. Kontilai owns 100 

percent of the voting shares of Collectors Café.  

RELIEF DEFENDANT 

21. Veronica Kontilai, age 46, resident of Miami, Florida, purports to be Mykalai 

Kontilai’s wife. Veronica Kontilai has no employment or other professional involvement in 

Collectors Café’s business. 

FACTS 

I.  Mykalai Kontilai Raised Money From Investors for Collectors Café.  

22. Collectors Café was incorporated in or around 2007 with a business plan to build 

brick-and-mortar coffee houses at which collectors would congregate and have the ability to 

purchase collectibles. 

23. In or around 2009, Collectors Café moved away from its plan to build coffee 

houses because of the associated costs with retail stores. Collectors Café’s business plan then 

evolved to its current plan, which involves the creation of an online website for collectibles and 

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an associated television show. Collectors Café has described its website as a combination of an 

auction site and a social networking site. 

24. Between 2007 and 2013, Collectors Café raised approximately $3.75 million from 

investors from the sale of convertible promissory notes and Series A Preferred shares. In 2013, 

Collectors Café raised $4 million through Series A Convertible Notes (“Series A Notes”). Then, 

from approximately April 2014 through approximately December 2018, Collectors Café raised 

approximately $21 million from the sale of Series A Preferred shares and Series B preferred 

shares and $2 million from Series B Promissory Notes (collectively, the “Collectors Café 

Offerings”). 

25.  Collectors Café and Kontilai used multiple offering documents when raising 

funds pursuant to the Collectors Café Offerings.  In particular, Collectors Café raised money 

from investors through at least two different versions of a Private Placement Memorandum 

(“PPM”), each dated April 28, 2008. 

26. One version of the PPM was created when Collectors Café intended to build 

coffee houses where collectors would meet (the “Coffee House PPM”). Defendants used the 

Coffee House PPM with investors prior to 2014, and at least two investors in 2014 received 

versions of this PPM.     

27. A second version of the PPM (the “Social Media PPM”) is also dated April 28, 

2008, but was updated and shortened after Collectors Café moved its business plan away from 

constructing coffee houses.   

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28. Defendants used the Social Media PPM, as modified by amendments dated 

February 1, 2015, October 15, 2015, April 12, 2016, and January 1, 2017, with investors who 

invested from 2015 forward.   

II. Collectors Café and Kontilai Made False, Fraudulent, and Material 
Misrepresentations and Omissions in Connection with the Collectors Café 
Offerings. 
 
29. In raising funds from investors pursuant to the Collectors Café Offerings, 

Defendants Kontilai and Collectors Café made numerous written and oral material false and 

misleading statements and omissions regarding, among other things, the use of investor 

proceeds, Kontilai’s investment in Collectors Café, the number of dealers and amount of 

inventory on Collectors Café’s website, and the extent of Collectors Café’s ownership of the 

Jackie Robinson baseball contracts along with their value.  

A. Material Misrepresentations and Omissions Regarding Kontilai’s Use of 
Investor Funds. 

 
30. Defendants Collectors Café and Kontilai made material misrepresentations and 

omissions regarding the use of investor proceeds that were misappropriated by Kontilai.  

31. Throughout the Collectors Café Offerings, by way of written documents and 

disclosures sent to investors as well as oral communications made to investors, Collectors Café 

and Kontilai represented to investors that it would use investor funds to pursue its stated business 

plan.  

32. Throughout the Collectors Café Offerings, the written materials provided to 

investors and potential investors described the intended use of investors’ money and did not 

disclose the type and magnitude of Kontilai’s personal use of their money: 

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a. Collectors Café’s standard practice with potential investors was to give them a high level 

overview of the Company, then set up a Web-Ex through which investors could see a 

mock-up of the website, and then to send them offering documents, including either the 

Coffee House PPM or the Social Media PPM, if the investors were interested in 

investing.   

b. Prior to receiving a PPM, some investors, including Investors A-E, received 

demonstrations of Collectors Café’s proposed website. 

c. Some investors, including Investor A on or about October 2, 2014, Investor F on or about 

September 3, 2014, Investor G on or about February 24, 2015, and Investor K on or about 

March 1, 2016, received a written business plan for Collectors Café (“Business Plan”). 

d. At least two versions of Collector Café’s Business Plan (one from 2014 and one from 

2016) stated, “The offering presented in the PPM is for the General Purpose of increasing 

Operating Capital of the Company, in preparation for initial growth and launch of our 

website, national television shows and completion of the retail center and television 

studio at Caesar’s Palace.”  

e. In an email to all investors dated April 23, 2016, which was drafted by Kontilai and sent 

out by his assistant on behalf of Collectors Café, Kontilai and Collectors Café stated that 

it sought to raise money for “the specific upcoming growth initiatives (outlined below),” 

which were then described as the production and distribution of a Chinese and Spanish 

language version of the Collectors Café TV Series and a partnership with Warner Music 

Group. 

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33. These representations were false when made because Kontilai always intended to 

use investors’ money for personal use, did use investors’ money for personal use, and ultimately 

misappropriated more than 25% of the money raised, including $6.1 million in cash in addition 

to extravagant charges on Collectors Café’s credit cards.  

34. In fact, from at least 2014 forward, Kontilai had no source of personal income 

other than misappropriating investor money. 

35. The monies misappropriated by Kontilai were not salary nor compensation, as 

there is no employment agreement between Kontilai and Collectors Café that permitted Kontilai 

to draw a salary or other form of compensation.  

36. Moreover, in order to induce investments, and mislead investors and potential 

investors into believing their investments would be used to further Collector Café’s stated 

business goal, Collectors Café and Kontilai told investors that Kontilai did not, and would not, 

take a salary or other compensation from Collectors Café: 

a. Kontilai told potential investors, including Investor F (orally prior to the investor’s 

investment in or around September 2014), Investor H (orally prior to the investor’s 

multiple investments in or around September 2016, April 2017 and April 2018), and 

Investor G (by email on or about September 30, 2015), that he was not taking a salary or 

being compensated.  

b. In the email to Investor G dated September 30, 2015, Kontilai wrote “I am very frugal 

and have not taken a dime of salary to date.” 

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c. On a phone call soliciting investors for additional investments on or about February 6, 

2017, an agent on behalf of Collectors Café and, on information and belief, under the 

direction of Kontilai, highlighted that Kontilai had not taken a salary in over 10 years. 

37. The investor funds misappropriated by Kontilai were also not loan repayments, as 

Kontilai did not loan money to Collectors Café, there were no loan agreements that permitted 

Kontilai to make loan repayments to himself from Collectors Café, nor was it disclosed to 

investors that their funds would be used to repay Kontilai for purported loan(s) he made to 

Collectors Café.  

38. As described more fully below, on or about May 14, 2018, Kontilai 

misrepresented to the SEC staff that money he misappropriated from Collectors Café was in fact 

legitimate transfers of money to repay Kontilai for obligations owed to him by Collectors Café. 

In support of his assertions, Kontilai knowingly created and presented the SEC staff with 

fabricated documents (an employment agreement, loan agreement, and bank statement) in an 

effort to mislead the SEC and further conceal his misappropriation of investor funds.  

39. A reasonable investor would have understood from Collector Café’s disclosures 

and Defendants’ statements that Kontilai’s personal use of investors’ funds was not an intended 

use of their investments.   

40. Each of the above disclosures and representations regarding Collector Café’s use 

of investor proceeds were false when made, and Defendants knew, were reckless in not knowing, 

or should have known, that their statements concerning the intended use of investors’ money 

were false and misleading.   

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41. Defendants omitted to state material facts that were necessary to render their 

disclosures and representations regarding Collector Café’s use of investor proceeds not 

misleading.  

42.  The above misrepresentations and omissions as to use of investor proceeds were 

material to investors and potential investors because, among other things, they believed their 

investments would be used to further the stated business goal in order to create profits and a 

return on their investment, and because the company money used for personal purposes by 

Kontilai would necessarily decrease the amount of money available to Collectors Café to 

effectuate its business plan. 

B. Material Misrepresentations and Omissions Regarding Kontilai’s Personal 
Investment in Collectors Café.  
 

43. Defendants Collectors Café and Kontilai made material misrepresentations and 

omissions with respect to Kontilai’s personal investment (or lack thereof) in Collector’s Café.  

44. Throughout the Collectors Café Offerings, Collectors Café and Kontilai 

represented to investors and potential investors, including Investor C (during a web-ex 

presentation on or about February 6, 2015), Investor E (during phone calls in our about 

August 2016), and Investor H (orally prior to the investor’s multiple investments in or around 

September 2016, April 2017 and April 2018), that he had personally invested $5 million in 

Collectors Café.  Kontilai told other investors, such as Investor F (orally prior to his investment 

in or around September 2014), that he had invested a significant amount of his own money.   

45. On a phone call soliciting investors for additional investments on or about 

February 6, 2017, an agent on behalf of Collectors Café and, on information and belief, under the 

direction of Kontilai, highlighted that Kontilai had invested $5 million in Collectors Café.  

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46. Each of the above representations regarding Kontilai’s investment in Collectors 

Café was false and misleading because Kontilai did not invest (nor loan) $5 million to Collectors 

Café, nor did Kontilai invest or loan a significant amount of his own money to Collectors Café. 

47. In fact, as alleged above and more fully described below, in an effort to mislead 

the SEC and conceal his fraud, Kontilai created and produced to the SEC a fabricated loan 

agreement purporting to document a $5 million loan to the company.   

48. A reasonable investor would have understood from Collectors Café’s disclosures 

and Defendants’ statements that Kontilai invested $5 million of his own money into Collectors 

Café and that that money was available to Collectors Café to use to further its business plan, 

served as an incentive to Kontilai to successfully follow through on its business plan, and 

validated Kontilai’s confidence in the future success of the business.  

49. Each of the above disclosures and representations regarding Kontilai’s investment 

in Collector’s Café were false when made, and Defendants knew, were reckless in not knowing, 

or should have known, that their statements concerning Kontilai’s investment in Collectors’ Café 

were false and misleading.   

50. Defendants omitted to state material facts that were necessary to render their 

disclosures and representations regarding Kontilai’s investment in Collectors’ Café not 

misleading.  

51.  The above misrepresentations and omissions as to Kontilai’s investment in 

Collectors’ Café were material to investors and potential investors because, among other things, 

it indicated that $5 million had been made available to Collectors Café by Kontilai to further its 

business plan, that Kontilai was strongly incentivized to successfully follow through on 

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Collectors’ Cafe business plan since his own money was at risk, and that Kontilai was in fact 

confident in the future success of the business because he invested a significant amount of 

money into Collectors Café.  

C. Material Misrepresentations and Omissions Regarding Dealers and 
Inventory on Collectors Café’s Website. 

 
52. Defendants Collectors Café and Kontilai made material misrepresentations and 

omissions with respect to the number of dealers and the amount of inventory on Collector Café’s 

website.  

53. Collectors Café and Kontilai represented to investors in the Collectors Café 

Business Plan that Collectors Café would receive 20% from the buyer and 20% from the seller 

on all sales made through the Collectors Café auction website.  These commissions from future 

sales of collectibles on Collectors Café’s website was the main stated revenue driver for 

Collectors Café’s business. 

54. Throughout the Collectors Café Offerings, Collectors Café and Kontilai touted 

that a large number of dealers were committed to sell a large volume of inventory of collectibles 

on Collectors Café’s website: 

a. Kontilai stated in a short video designed to promote Collectors Café that was on its 

website and emailed to numerous investors that Collectors Café had a “master dealership 

made up of hundreds of dealers.” 

b. Kontilai represented to investors, including Investor B (orally in or around March 2015), 

Investor C (orally in or around February 2015), Investor E (orally in or around August 

2016) and Investor I (orally in or around April 2016) that there was billions of dollars of 

inventory available on Collectors Café’s website.   

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c. Kontilai told some investors, including Investors A (orally in or around October 2014) 

and Investor E (orally in or around August 2016), that he had hundreds of dealers signed 

up. 

d. Kontilai also told investors, including Investor B (orally in or around March 2015) and 

Investor E (orally in or around August 2016), that the dealers were signed up under 10 

year contracts.   

55. These statements were false and misleading.  In reality, in preparation for 

Collectors Café’s so-called soft launch in 2016, three dealers had signed a “basic dealer 

agreement” that expired within 180 days of execution and did not obligate the dealer to put any 

specific quantity of inventory on Collector Café’s website.   

56. As of August 2018, only three dealers had ever posted inventory to Collectors 

Café’s website, the website was not active at that time and most of the inventory was non-

exclusive inventory from one dealer who also had a physical store in New York City. Inventory 

sold through that dealer’s store or on his own website would not result in a commission for 

Collectors Café.   

57. At the time of these representations, Collectors Café and Kontilai knew that 

Collectors Café had not signed up anywhere near the number of dealers they were representing 

and further knew that it would have been prohibitively expensive to do so, as Collectors Café 

would have been responsible for hiring photographers to take photographs of the dealers’ items, 

drafting descriptions and cataloging the items, and then uploading this information onto its 

website.  

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58. A reasonable investor would have understood from Collector Café’s disclosures 

and Defendants’ statements that hundreds of dealers had agreed to post a large amount of 

collectibles on Collectors Café’s website worth upwards of a billion dollars, that the anticipated 

volume of dealers and inventory committed to the website correlated directly with anticipated 

investor profit, and that the increased profits and success would increase the likelihood that a 

large company would be interested in acquiring Collectors Café.  

59. Each of the above disclosures and representations regarding the volume of dealers 

and inventory committed to Collectors Café’s business were false when made, and Defendants 

knew, were reckless in not knowing, or should have known, that their statements concerning the 

volume of dealers and inventory committed were false and misleading.   

60. Defendants omitted to state material facts that were necessary to render their 

disclosures and representations regarding the volume of dealers and inventory committed to 

Collectors Café’s business not misleading.  

61.  The above misrepresentations and omissions as to the volume of dealers and 

inventory committed to Collectors Café’s business were material to investors and potential 

investors because, among other things, the volume of dealers and inventory committed to 

Collectors Café’s business was directly tied to the future profits and success of the company.  In 

fact, it was the expected high volume of sales of collectibles on Collectors Café’s website that 

Kontilai touted to bring Collectors Café a profit. 

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D.  Material Misrepresentations and Omissions Regarding the Jackie Robinson 
Contracts. 

 
62. Defendants Collectors Café and Kontilai made material misrepresentations and 

omissions with respect to the ownership and valuation of baseball contracts signed by Jackie 

Robinson.   

63. Collectors Café and Kontilai represented to investors and potential investors that 

(i) Collectors Café owned contracts signed by Jackie Robinson; and (ii) the contracts had been 

appraised at $36 million. Defendants representations were false and misleading and omitted 

material facts necessary to render these statements not false and misleading, because (i) 

Collectors Café did not own a 100% interest in the contracts and was not entitled to all proceeds 

from the sale of the contracts; and (ii) there was substantial doubt about the $36 million 

valuation, including an appraisal of $10 million that was provided to Collectors Café and 

Kontilai.   

64. Collectors Café acquired the two baseball contracts signed by Jackie Robinson in 

or around 2013: a contract Robinson signed with the minor league Montreal Royals in 1945 and 

a contract that he signed with the major league Brooklyn Dodgers in 1947.  Collectors Café 

acquired these contracts for approximately $2 million.  

65. Collectors Café touted the Jackie Robinson contracts as a major asset of the 

company: 

a. In the Second Amendment to the Social Media PPM, the Company stated “The Company 

successfully concluded its second private capital raise in April of 2010.  The company 

has been fully funded to complete its final launch tasks since that date.  It remains in a 

strong financial position with a positive cash position as well as having acquired a 

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collectibles asset which has been appraised at $36,000,000.  This asset was acquired at an 

undervalued price of $2,000,000 and is likely to generate millions of dollars of additional 

cash flow upon its liquidation in 2015.”  The Social Media PPM was provided to most 

investors who invested after 2014 with at least 100 investors having received it.  

b. Kontilai represented to at least two investors – Investor A (orally in or around October 

2014) and Investor F (orally in or around August-September 2014) – that their investment 

was “secured” or “protected” by the valuation of the Jackie Robinson contracts.   

c. Kontilai led another investor, Investor H, to believe that the value of the Jackie Robinson 

contracts protected his investment by describing the contracts as a tangible asset of the 

company that had not yet earned revenue. 

66. These statements were false and misleading.  In reality, Collectors Café only 

owned a fraction of the Jackie Robinson contracts, was only entitled to a fraction of the proceeds 

from the sale of the contracts and the sale of the contracts was expected to be for far less than 

$36 million.   

67. Defendants representations that Collectors Café owned the Jackie Robinson 

contracts were false and misleading and omitted material facts, because Collectors Café did not 

own a 100% interest in the contracts and was not entitled to 100% of the proceeds from their 

sale:  

a. In connection with the acquisition of these contracts in 2013, Collectors Café entered into 

six “Series A Notes” (as amended) that totaled $4 million and stated that the loan 

proceeds would be used for acquisition of the contracts and “working capital purposes.” 

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b. Under the terms of the Series A Notes, the holders of those notes are entitled to a return 

of 50% of any net proceeds from the sale of the Jackie Robinson contracts.  Net proceeds 

is calculated as (a) the purchase price paid by an unrelated third party buyer for the 

contracts less (b) the payoff amount of the Series A Notes less (c) without duplication 

any principal, interest, default interest, fees and costs already paid under the Series A 

notes less (d) any reasonable expenses associated with the contracts, but excluding their 

purchase price.    

c. The following year, in 2014, Collectors Café entered into two Series B Secured 

Promissory Notes (the “Series B Notes”) that totaled $2 million, which were payable 

upon the sale of the Jackie Robinson contracts.  

d. Once Collectors Café receives its portion of the net proceeds, it must repay the Series B 

Notes.   

e. In addition to the Series A Notes and Series B Notes, Collectors Café has contracted to 

give three other parties a portion of the proceeds. 

68. Additionally, by no later than January 20, 2016, Defendants representations about 

the $36 million valuation were false and misleading and omitted material facts, because Kontilai 

had credible information indicating that the contracts were worth much less than $36 million: 

a. On January 20, 2016, Kontilai received an Insurance Appraisal Report regarding the two 

Jackie Robinson contracts that was prepared by a confidential broker, authenticator and 

appraiser using final bids from several auction houses specializing in sports history and 

reference to high value historic documents. 

b. This report values the Jackie Robinson contracts at $10 million.  

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c. The confidential broker, authenticator and appraiser disclosed to Kontilai that he was 

receiving pushback for even a $10 million valuation.  

69. Neither Collectors Café nor Kontilai disclosed to investors or prospective 

investors that the $36 million valuation likely overvalued the contracts, or that on or about 

January 20, 2016, that they received an Insurance Appraisal Report valuing the Jackie Robinson 

contracts for only $10 million, or that they were told that there was resistance to even a $10 

million valuation.  

70. On information and belief, Kontilai was aware that the $36 million appraisal of 

the Jackie Robinson contracts overvalued the asset by a significant amount at the time of the 

appraisal and prior to receiving the $10 million appraisal.  In fact, the overvaluation of the Jackie 

Robinson contracts was not only confirmed by the subsequent $10 million appraisal described 

above, but further borne out when the individual who appraised the contracts for $36 million 

offered to buy the contracts for less than $8 million, which Defendants appear to have accepted. 

The final documents for this sale were recently circulated to all parties for execution.  Because of 

Collector Café’s fractional ownership and duty to repay promissory notes, it is expected to 

receive less than $2 million.   

71. A reasonable investor would have understood from Collector Café’s and 

Kontilai’s disclosures and statements about the ownership interest of the Jackie Robinson 

contracts that Collectors Café owned 100% of the contracts, were entitled to 100% of the 

proceeds from any sale of the contracts, and expected to receive $36 million upon the sale of the 

contracts.  

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72. Each of the above disclosures and representations regarding the ownership and 

valuation of the Jackie Robinson contracts were false when made, and Defendants knew, were 

reckless in not knowing, or should have known, that their statements concerning the ownership 

and valuation of the Jackie Robinson contracts were false and misleading.   

73. Defendants omitted to state material facts that were necessary to render their 

disclosures and representations regarding the ownership and valuation of the Jackie Robinson 

contracts not false and misleading.  

74.  The above misrepresentations and omissions as to the ownership and valuation 

of the Jackie Robinson contracts were material to investors and potential investors because, 

among other things, the value of Collectors Café’s assets safeguarded investors against the 

potential failure of the company, and because it would be important to investors to understand 

that Collectors Café would receive substantially less than $36 million upon the sale of the 

contracts.  

E. Collectors Café and Kontilai Are Each Liable for Their Misstatements and 
Omissions. 

 
75. All of the misrepresentations and omissions detailed above were made in 

connection with the offer, purchase, or sale of securities issued by Collectors Café. 

76. Collectors Café and Kontilai both obtained money by means of the 

misrepresentations and omissions detailed above. 

77. Kontilai made or directed each misrepresentation and omission detailed above. 

78. Kontilai determined the content of and had ultimate authority over the PPMs, as 

well as marketing materials, internet websites, and other documents and emails used to solicit 

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prospective investors. Kontilai had sole control of Collectors Café, and he personally made the 

oral representations detailed above.  

79. Similarly, Collectors Café made the representations Kontilai made. Kontilai had 

authority to make representations on behalf of Collectors Café, and did in fact make 

representations on behalf of Collectors Café. 

80. At all times, Collectors Café and Kontilai acted with the requisite scienter. 

III. Collectors Café and Kontilai Engaged in a Scheme to Defraud Investors.  

81. From no later than April 2014 through the present, Collectors Café and Kontilai 

engaged in a scheme to defraud the Collectors Café investors, and engaged in numerous acts, 

practices or courses of business that defrauded the Collectors Café investors. Acts in furtherance 

thereof include the false and misleading statements, omissions, and other conduct described 

above, and the acts described below.   

A.  Concealment of Misappropriation of Investor Funds 

82. Despite the representations that Collectors Café would use investor money to fund 

specific aspects of the business and did not allow for Kontilai to use investor funds to pay 

personal expenditures and fund his lavish lifestyle, and despite Kontilai’s representations that he 

was “very frugal” and was not even taking a salary, Kontilai misappropriated at least $6.1 

million from Collectors Café in the form of cash withdrawals and transfers to Kontilai’s personal 

accounts. Kontilai used these funds for personal expenses. 

83. Kontilai attempted to conceal many of these transfers by running investor funds 

through bank accounts of his associate.  

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84. In or around 2012, Kontilai asked his associate, G.H., to set up a bank account in 

her name.  Kontilai told G.H. that he planned to transfer money into the account and then direct 

her to withdraw money from the account in cash and provide it to him.  

85. Kontilai instructed G.H. that, if a bank employee asked questions about the cash 

withdrawals, G.H. was to tell the bank employee that she was a consultant to Collectors Café and 

that the money was for the purchase of collectibles, which could be acquired at a better price if 

cash was used.  

86. This instruction was intended to conceal, and further, Defendants’ fraudulent 

scheme because Collectors Café and Kontilai knew at the time of instructing G.H. to open the 

bank accounts, through the time of directing the withdrawals of cash, that Collectors Café would 

not purchase collectibles with the funds. 

87. G.H. opened a new bank account at Kontilai’s instruction on March 14, 2012.  

88. From 2012 to 2014, Kontilai obtained investors’ money in the form of cash in the 

following manner: 

a. Kontilai directed transfers of funds invested with Collectors Café to G.H.’s accounts; 

b. Shortly after a deposit of investor money into G.H.’s account, G.H. withdrew the same 

amount by visiting bank branches in person. Kontilai accompanied G.H. in nearly every 

instance when she withdrew the money. 

c. Kontilai directed G.H. to immediately give the cash to Kontilai after it was withdrawn 

and G.H. complied.    

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d. Between approximately the end of 2012 through March 2014, approximately $3.3 million 

was pilfered in this manner. Between April 1, 2014 and December 20, 2018, Collectors 

Café transferred approximately $2.1 million to Kontilai via G.H’s accounts. 

89. In or around July 2018, Kontilai told G.H. that he again needed help to transfer 

cash to himself from Collectors Café. Kontilai told his associate that he needed the money to 

maintain his lifestyle and that because of an investigation by the SEC, it would not look good if 

Kontilai withdrew the money himself.   

90. On or about July 10, 2018, Kontilai, through Collectors Café, transferred 

$250,000 to G.H.’s personal account (“Bank Account 1”).   

91. On or about July 11, 2018, G.H. obtained a cashier’s check from the same bank 

account for $250,000. G.H. delivered the check to Kontilai at his apartment in New York City. 

92. On or about July 11, 2018, Kontilai requested that G.H. use her account from 

another bank (“Bank Account 2”) to receive transfers from Collectors Café. On or about the 

same day, at the direction of Kontilai, the $250,000 cashier’s check from Bank Account 1 was 

deposited in Bank Account 2. 

93. Kontilai also instructed G.H. to open an account at a separate bank, (“Bank 

Account 3”) to receive transfers from Collectors Café.   

94. On or about July 11, 2018, in addition to the $250,000 cashier’s check deposited 

into Bank Account 2, Kontilai transferred $375,000 into Bank Account 2 and an additional 

$375,000 into Bank Account 3. These funds, belonging to Collectors Café, were subsequently 

misappropriated by Kontilai.   

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95. In addition to withdrawing cash at the direction of Kontilai from the accounts to 

which he had transferred Collectors Café funds, Kontilai instructed G.H. to use the money he had 

transferred into the accounts to purchase gold bars online that were delivered to her apartment in 

New York.    

96. At Kontilai’s direction, G.H. turned over all the gold bars to Kontilai.  

97. Kontilai then sold the gold bars for cash.   

98. Kontilai also used Collectors Café’s credit cards and transfers from Collectors 

Café’s account for personal expenses.  

99. These charges include rent on an oceanfront condo in Miami, tuition at a private 

school in Las Vegas, expenses at gentleman’s clubs, stays at a luxury resort in Miami over New 

Year’s Eve, and various personal items at high-end stores such as Chanel, Louis Vuitton, Saks 

Fifth Avenue, Cartier, and Rolex. 

100. Kontilai never disclosed to any of his investors or prospective investors that 

money he received from the sale of Collectors Café securities would be used for anything other 

than the Collectors Café business, much less that he would use investor money to fund his lavish 

lifestyle. 

B.  Fabrication of Documents 

101. In furtherance of his scheme to misappropriate and misuse investor money, and to 

conceal and obfuscate his scheme from the SEC and others, Kontilai fabricated multiple 

documents with the intent to create the appearance that transfers from Collectors Café to himself 

were legitimate.  

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102. On May 14, 2018, Kontilai produced to the SEC a fabricated employment 

agreement that purportedly provided Kontilai the right to a salary from Collectors Café.  

103. The purported employment agreement provided to the SEC was backdated, and 

contains a forged signature of G.H. (who was involved in the cash transfers as described above) 

that misidentified her as “Chairman of the Board.”  

104. G.H. never signed this purported employment agreement and never served as 

“Chairman of the Board.”    

105. Kontilai knew the copy of the purported employment agreement produced to the 

SEC was fabricated at the time he produced it to the SEC. 

106. Kontilai produced the fabricated copy of the purported employment agreement to 

the SEC with the intent to mislead the SEC and others into believing that Collectors Café was 

contractually obligated to pay funds to Kontilai. 

107. Kontilai also produced to the SEC a copy of a loan agreement purporting to 

document a $5 million loan from Kontilai to Collectors Café.  That loan agreement was 

purportedly signed by Kontilai and G.H., and again misidentified G.H. as Chairman of the 

Board.  

108. Kontilai attached to the loan agreement a bank statement purporting to reflect the 

$5 million deposit into a Collectors Café’s account in an effort to corroborate his claim that he 

leant Collectors Café $5 million.  

109. The Collectors Café bank statement produced to the SEC is a fabricated 

document. The actual bank statement reflects a deposit of $1,000 into the account of Collectors 

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Café, not $5 million. Kontilai altered the bank statement and provided the altered version to the 

SEC. 

IV. Kontilai and Collectors Café Took Actions to Impede Investors from 
Communicating with SEC Staff. 

 
110. In 2015 and 2017 certain investors asserted alleged that Collectors Café and 

Mykalai Kontilai were engaged in fraud. 

111. Collectors Café and Mykalai Kontilai responded to allegations of fraud by, among 

other things, drafting, creating, and signing a 2015 Stock Purchase Agreement (“2015 SPA”) and 

a 2017 Settlement Agreement (“2017 Settlement Agreement”) that contained explicit provisions 

impeding investors from communicating with the SEC.  

A. Collectors Café and Mykalai Kontilai Paid Investors Money on Condition 
That They Refrain From Communicating With Law Enforcement. 
 

112. In 2015, Collectors Café investors communicated concerns about their 

investments and the progress of Collectors Café in relation to claims by Kontilai that the 

company would launch in early 2015.  

113. In an email sent to Kontilai on July 30, 2015, one of these investors confronted 

Kontilai about representations he made about the company with, among other things, the 

following: “What happened to that 25 million artifact? Did you get a buyer? Why do you say one 

thing and not really follow through? …. You are not a person of integrity. You are not a person 

of honesty. You don’t tell the truth.” 

114. In October 2015, Kontilai arranged for those investors’ shares in Collectors Café 

ostensibly to be repurchased by his sister-in-law. The investors sold their shares of Collectors 

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Café stock purportedly to Kontilai’s sister-in-law for a purchase price of $50,000 pursuant to the 

2015 SPA, dated October 8, 2015.  

115. Collectors Café was a party to the 2015 SPA, and Kontilai signed the agreement 

on behalf of the company.   

116. The 2015 SPA states the following: 

“[Investors] . . . warrant and affirm that they have not, directly or 
indirectly, individually, collectively or otherwise, as of the date of 
execution of this Agreement, contacted any third-party, including but not 
limited to governmental or administrative agencies or enforcement 
bodies, for the purpose of commencing or otherwise prompting 
investigation or other action relative to [Collectors Café] or the subject 
herein.  [Investors] … further warrant and affirm that. . . they will 
not, directly or indirectly, individually, collectively or otherwise, 
contact any third-party, including, but not limited to governmental 
or administrative agencies or enforcement bodies, for the purpose of 
commencing or otherwise prompting investigation or other action 
relative to [Collectors Café] or the subject matter herein.  The parties 
agree that the terms of this provision are not designed or intended to 
accomplish any improper purpose, but rather, are included as material 
consideration in light of the time and expense which could be incurred 
by all parties, if investigation or other third-party action were to arise 
regarding the subject matter herein….” (Emphasis added.) 
 

117. The SEC is a governmental agency that investigates the type of misconduct raised 

by the investors prior to execution of the 2015 SPA. 

B. Collectors Café and Mykalai Kontilai Agreed To Resolve Allegations of 
Fraud on Condition That Investors Refrain From Communicating With The 
SEC. 

 
118. In March 2017, two investors sent Collectors Café a letter alleging that Collectors 

Café made material misrepresentations and omissions that supported claims under the antifraud 

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provisions of the federal securities laws, and sought return of their investment from Collectors 

Café, interest, and attorney fees. 

119. Collectors Café did not repay the investors, and on May 18, 2017, the investors 

filed a lawsuit against Collectors Café alleging securities fraud, among other things (the “2017 

Investor Case”). 

120. On June 26, 2017, Collectors Café, Kontilai, and the two investors entered into a 

confidential settlement agreement to resolve the 2017 Investor Case (“Settlement Agreement”). 

121. The Settlement Agreement states: 

“The Shareholders, for themselves and their counsel and advisors, 
confirm that they are not aware of, and have not had to date, and will 
not initiate on a going forward basis, any communications with 
any regulatory agencies such as the United States Securities and 
Exchange Commission or any other Federal, State, or Local 
governmental agency concerning the matters related to this 
Agreement. Nothing herein would prevent the parties from 
responding to, and/or fully complying with, a subpoena or other 
governmental and or regulatory compulsory process.” (Emphasis 
added.) 
 

122. The Settlement Agreement provided for the return of the investors’ principal 

investment in Collectors Café in three payments over a year: $750,000 by June 27, 2017; 

$384,375 by December 27, 2017; $393,750 by June 27, 2018.   

123. On June 27, 2017, Kontilai made the initial payment of $750,000 to the investors. 

124. At or around the time the parties were executing the Settlement Agreement, SEC 

staff contacted the investors’ counsel to obtain information regarding their complaint in the 2017 

Investor Case. 

125. After the parties executed the Settlement Agreement and after the initial payment 

to investors, the investors’ counsel responded to multiple requests from the SEC staff. 

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126. The investors’ counsel reported to SEC staff that his clients’ case against Kontilai 

and Collectors Café had been resolved and that a confidentiality agreement prevented his clients 

from speaking to SEC staff voluntarily. The investors did not provide the SEC information until 

after the SEC served their counsel with subpoenas. 

127. By letter dated January 4, 2018 from counsel for Collectors Café and Kontilai to 

the investors’ counsel, Collectors Café and Kontilai stated that they “have reason to believe” that 

one or more of the investors or their counsel had been in communication with the SEC about 

Collectors Café and Kontilai. 

128. In the January 4 letter, Collectors Café and Kontilai claimed that the provision 

prohibiting communications with the SEC was a “material terms [sic] of the Settlement 

Agreement and pivotal to [Collectors Café and Kontilai] settling the dispute … and entering into 

the Settlement Agreement and paying the compensation outlined” in the Settlement Agreement. 

129. On April 26, 2019, Collectors Café and Kontilai filed a lawsuit against the 

investors (“2019 Lawsuit”). 

130. In the 2019 Lawsuit, Collectors Café and Kontilai asserted claims for fraud, 

breach of contract, unjust enrichment, intentional interference with contractual relations, civil 

conspiracy, and breach of implied covenant of good faith and fair dealing.  

131. Each of the claims asserted in the 2019 Lawsuit are based on the factual allegation 

that the investors communicated with the SEC about Collectors Café and Kontilai. 

132. Collectors Café and Kontilai claimed that contact with the SEC could have 

jeopardized Collectors Café’s entire business: 

Due to Defendants’ actions, some of Plaintiffs’ investors have been 
contacted by the SEC and there is a potential that the entire enterprise 

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developed since 2007 could be jeopardized, with the entire value of the 
enterprise at risk, including the initial investments of approximately 
$30,000,000 and the current stock valuation which far exceed the value 
of the initial investments. 
 

133. Collectors Café and Kontilai requested punitive and compensatory damages in 

their complaint. 

134. In a phone call with all investors on June 18, 2019, Kontilai repeatedly referenced 

this lawsuit to the investors, touting the damages that he had claimed and that he intended to 

amend this lawsuit to include others whom he viewed as the source of the company’s troubles.   

135. Collectors Café’s and Kontilai’s 2019 Lawsuit was dismissed without prejudice 

on September 26, 2019, because Collectors Café and Kontilai failed to effect service on the 

investors.  

136. As a result of the above, Collectors Café and Kontilai took actions to impede 

investors from communicating directly with SEC staff about a possible securities law violation, 

including by enforcing and threatening to enforce confidentiality agreements.  

V. Mykalai Kontilai and Collectors Café Continue to Make Misrepresentations and 
Omissions to Investors. 
 
137. After the SEC filed its complaint, on June 18, 2019, Collectors Café and Mykalai 

Kontilai held a telephonic meeting that was open to investors. Numerous Collectors Café 

investors participated in the call. 

138. During the call Defendants made efforts to convince investor-victims they had not 

been victimized by Defendants’ fraud in order to persuade those victims to refrain from 

demanding return of their investments and to support Defendants’ plan to request a release of 

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money from the asset freeze purportedly to continue business operations. Kontilai characterized 

the allegations in the complaint in this case as “all falsehoods, all lies, all bullshit.”  

139. Collectors Café and Mykalai Kontilai then made numerous false and misleading 

statements, and omitted material facts, during this June 18 call with investors. 

140. First, Kontilai and Collectors Café stated that the SEC wrongfully filed its lawsuit 

at least in part because the SEC did not have – and purposefully did not seek to obtain – all of 

the company’s bank statements for periods prior to April 2014. Kontilai stated, with counsel of 

record on the call, that the SEC did not subpoena “the first seven years of records,” including 

“years that [Kontilai] put money in the company [in] 2007, ’8, ’9, [and] ’10,” and that “[the 

SEC] intentionally did not subpoena all of the years of bank records that show the money that I 

put in.”   

141. The implication of Kontilai’ s statements was that these bank statements would 

show that Kontilai loaned the company money and, as a result, his personal use of company 

money constituted partial repayment of those loans and therefore was a legitimate company 

obligation. 

142. These statements are false and misleading because, among other things, Kontilai 

and Collectors Café omitted the material facts that (i) no bank statement will support the claim 

that Kontilai was entitled to the company’s money because Kontilai never loaned the company 

the amounts that he purports to claim he loaned; (ii) Kontilai and Collectors Café fabricated 

documents to evidence purported loans because they know no such loans were ever made; 

(iii) the company’s PPMs told potential investors throughout the life of the company that the 

company owed no debts; (iv) the SEC requested by subpoena to the company all of its bank 

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records dating back to 2008 and all records related to any claim that transfers from the company 

to Kontilai were legitimate; and (v) prior to the phone call, the SEC produced to Defendants 

copies of bank records it received pursuant to subpoenas, which included all statements from the 

Bank of America account Kontilai used to fabricate a bank statement from the time the account 

opened in June 2007 to the time it closed in June 2008.  

143. During the June 18 call, Kontilai also stated that their delivery and use of a 

fabricated employment agreement to the SEC was the fault of G.H. and their previous counsel.  

Collectors Café and Kontilai stated that G.H. provided Kontilai with copies of his employment 

agreement, a promissory note, and a bank statement prior to his testimony in the SEC’s 

investigation.  

144. These statements falsely implied that G.H. or the Defendants’ previous counsel 

had fabricated Kontilai’s employment agreement, promissory note, and bank statement. These 

statements were false because G.H. never provided Kontilai with copies of these purported 

documents and because these documents never existed.  Collectors Café and Kontilai knew at 

all relevant times that these documents never existed.  

145. In fact, Kontilai and Collectors Café knowingly fabricated the documents they 

claim G.H. provided them, including the employment agreement, which purported to 

memorialize terms of agreements that never existed. 

146. During the June 18 call, when confronted with the claim from a participant on the 

call that the company does not own a tangible asset, Kontilai and Collectors Café stated that the 

company has “a massive intellectual property portfolio with close to 100 trademarks pending 

patent authenticity insurance.” 

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147. This statement is false and misleading because the company’s patent applications 

were abandoned no later than June 22, 2018. The statement also is misleading because Kontilai 

and Collectors Café omitted the fact that the company has been dormant for over 18 months 

and, therefore, could not have been using any valid trademarks or policing those marks during 

that time. Disclosure of these facts was necessary to correct the impression of the Defendants’ 

statement that the company had a valuable intellectual property portfolio. 

148. During the June 18 call, Kontilai also referenced a claim that Collector’s Café has 

“hundreds of dealers committed to putting inventory on the [Collector’s Café] [web]site” 

claiming it to be true.    

149. This statement is false and misleading because, as outlined in paragraphs 52-61, 

Collector’s Café did not have hundreds of dealers committed to putting inventory on its website, 

in fact, as of August 2018, only three dealers had ever posted inventory to Collectors Café’s 

website, the website was not active at that time and most of the inventory was non-exclusive 

inventory from one dealer who also had a physical store in New York City.  

150. Kontilai also stated on the call that two things need to happen for the company to 

use proceeds from the sale of the Jackie Robinson contract: (1) the assets need to be unfrozen 

(something for which Kontilai and Collectors Café were soliciting support from investors); and 

(2) the Los Angeles Dodgers need to agree to the sale.  

151. This statement is misleading because Kontilai and Collectors Café omitted the 

material facts that the Los Angeles Dodgers claim to own the contracts, they refuse to agree to 

the sale, and the only potential buyer known at the time of the investor call would not proceed 

with the sale unless and until the claim asserted by the Los Angeles Dodgers no longer clouds 

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title to the contracts. Omission of these facts left the false impression that an actual sale is 

imminent but for the order freezing Defendants’ assets. 

152. The purpose of the June 18 call, executed through Defendants’ misstatements and 

omissions, was to lull investor-victims into falsely believing that they had not been victimized; 

that the SEC had engaged in misconduct and brought false allegations of fraud against 

Defendants; that Collector’s Café had value and assets, which would be lost if investor-victims 

did not support Defendants’ request to the Court that it unfreeze assets; and that investor-

victims could still expect a return on their investment if the Court unfroze assets.   

VI. Veronica Kontilai Received Ill-Gotten Gains. 

153. Veronica Kontilai has not earned income in over 30 years. 

154. Veronica Kontilai has received no income since, at least, 2007. 

155. Veronica Kontilai has not filed tax returns since, at least, 2007. 

156. Veronica Kontilai has provided no recognizable consideration to Collectors Café, 

such as services, employment or otherwise.  

157. Mykalai Kontilai has had no employment or material sources of income other 

than his work for Collectors Café since 2007. 

158. Since April 1, 2014, Veronica Kontilai received more than $275,000 in cash 

deposits to her personal bank accounts. These funds belonged to Collectors Café and Veronica 

Kontilai has no legitimate claim to the cash deposited into her personal bank accounts. 

159. The cash deposited into Veronica Kontilai’s personal bank accounts are proceeds 

from the fraud alleged above. 

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160. Since April 1, 2014, Veronica Kontilai received at least $14,653 from Mykalai 

Kontilai’s bank accounts. 

161. Veronica Kontilai has no legitimate claim to the funds transferred into her 

personal bank accounts from the accounts of Mykalai Kontilai. 

162. The funds transferred into Veronica Kontilai’s personal bank accounts from the 

accounts of Mykalai Kontilai are proceeds from the fraud alleged above. 

163. Veronica Kontilai spent at least $23,622 on Collectors Café’s credit cards. 

164. The credit card charges by Veronica Kontilai on Collectors Café’s credit cards 

were used to make, among other things, payments to a private school, rental car companies, 

taxis, movies, restaurants, and storage units. 

165. Veronica Kontilai had no legitimate right to use Collectors Café’s credit cards to 

pay for her personal expenses. 

166. The property acquired and other expenses incurred by Veronica Kontilai through 

use of Collectors Café’s credit cards are proceeds from the fraud alleged above. 

167. Mykalai Kontilai used Collectors Café funds to purchase custom suits for 

Veronica Kontilai. 

168. Veronica Kontilai has no legitimate claim to the custom suits purchased by Mr. 

Kontilai. 

169. The custom suits are proceeds from the fraud alleged above. 

170. As a result of the above, Veronica Kontilai benefited directly from Collectors 

Café’s and Mykalai Kontilai’s fraudulent conduct and she would be unjustly enriched if not 

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compelled to disgorge the funds received or expended on her behalf as a direct result of the 

misconduct. 

FIRST CLAIM FOR RELIEF 
Fraud (Misstatements and Omissions): Section 10(b) of the 

Exchange Act and Rule 10b-5(b)  
(Collectors Café and Mykalai Kontilai) 

 
171. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

172. Collectors Café and Kontilai, directly or indirectly, acting with scienter, by use of 

the means or instrumentalities of interstate commerce, or of the mails, or of a facility of a 

national securities exchange, in connection with the purchase or sale of a security, made untrue 

statements of material fact or omitted to state material facts necessary in order to make the 

statements made, in light of the circumstances under which they were made, not misleading. 

173. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly, 

violated and, unless restrained and enjoined, will again violate Section 10(b) of the Exchange 

Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b-5] thereunder. 

SECOND CLAIM FOR RELIEF 
Fraud (Misstatements and Omissions): Section 17(a)(2) of the 

Securities Act  
(Collectors Café and Mykalai Kontilai)  

 
174. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

175. Collectors Café and Kontilai, directly or indirectly, in the offer or sale of 

securities, by use of the means or instruments of transportation or communication in interstate 

commerce or by use of the mails, acting with the requisite state of mind, obtained money or 

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property by means of an untrue statement of material fact or omission to state a material fact 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading. 

176. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly, 

violated and, unless restrained and enjoined, will again violate Section 17(a)(2) of the Securities 

Act [15 U.S.C. § 77q(a)(2)]. 

THIRD CLAIM FOR RELIEF 
Fraud (Scheme): Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) 

(Collectors Café and Mykalai Kontilai) 
  

177. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

178. Collectors Café and Kontilai, directly or indirectly, acting with scienter, by use of 

the means or instrumentalities of interstate commerce, or of the mails, or of a facility of a 

national securities exchange, in connection with the purchase or sale of a security: employed 

devices, schemes, or artifices to defraud; or engaged in acts, practices, or courses of business 

which operated or would operate as a fraud or deceit upon another person. 

179. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly, 

each violated, and, unless restrained and enjoined, will again violate Section 10(b) [15 U.S.C. 

§ 78j(b)] of the Exchange Act and Rule 10b-5(a) and (c) [17 C.F.R. § 240.10b-5(a) and (c)] 

thereunder. 

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FOURTH CLAIM FOR RELIEF 
Fraud (Scheme): Section 17(a)(1) and (3) of the Securities Act  

(Collectors Café and Mykalai Kontilai) 
  
180. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

181. Collectors Café and Kontilai, directly or indirectly, in the offer or sale of 

securities, by use of the means or instruments of transportation or communication in interstate 

commerce or by use of the mails, acting with the requisite state of mind, employed a device, 

scheme, or artifice to defraud and engaged in transactions, practices, or a course of business 

which operated or would operate as a fraud or deceit upon purchasers. 

182. By virtue of the foregoing, Collectors Café and Kontilai, directly or indirectly, 

violated and, unless restrained and enjoined, will again violate Section 17(a)(1) and (3) of the 

Securities Act [15 U.S.C. § 77q(a)(1) and (3)]. 

FIFTH CLAIM FOR RELIEF 
Impeding: Rule 21F-17 of the Exchange Act 

(Collectors Café and Mykalai Kontilai) 

183. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

184. Collectors Café and Kontilai took actions to impede individuals from 

communicating directly with the SEC staff about a possible securities law violation, including by 

enforcing and threatening to enforce confidentiality agreements with respect to such 

communications. 

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185. By virtue of the foregoing, Collectors Café and Kontilai violated and, unless 

restrained and enjoined, will again violate Rule 21F-17 of the Exchange Act [17 C.F.R. 

§ 240.21F-17]. 

SIXTH CLAIM FOR RELIEF 
Equitable Disgorgement 

(Relief Defendant Veronica Kontilai) 

186. The SEC realleges and incorporates by reference paragraphs 1 through 170, as 

though fully set forth herein. 

187. Relief Defendant Veronica Kontilai obtained money, property and assets which 

are the proceeds, or are traceable to the proceeds, of the violations of the securities laws by 

Defendants Collectors Café’s and Mykalai Kontilai. 

188. Relief Defendant Veronica Kontilai received gifts and other assets purchased 

from the proceeds, or that are traceable to the proceeds, of the violations of the securities laws by 

Defendants Collectors Café’s and Mykalai Kontilai. 

189. Relief Defendant Veronica Kontilai received these funds and assets under 

circumstances in which it is not just, equitable, or conscionable for her to retain the funds or 

assets, and therefore has been unjustly enriched. 

RELIEF SOUGHT 

WHEREFORE, the SEC respectfully requests that this Court: 

I. 

Find that Defendants Collectors Café and Mykalai Kontilai violated the securities laws 

and rules promulgated thereunder as alleged against them herein; 

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II. 

Enter an Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, preliminarily and permanently restraining and enjoining the Defendants Collectors 

Café and Mykalai Kontilai from violating the laws and rules alleged against them in this 

Amended Complaint; 

III. 

Order Defendants Collectors Café and Mykalai Kontilai and Relief Defendant Veronica 

Kontilai to disgorge all of the ill-gotten gains from the violations alleged in this Amended 

Complaint, and order them to pay prejudgment interest thereon;  

IV. 

Order Defendants Collectors Café and Mykalai Kontilai to pay civil money penalties 

pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)]; and 

V. 

 Grant such other and further relief as this Court deems just and proper. 

JURY DEMAND 

The SEC demands a trial by jury on all claims so triable.   

 
Dated: November 4, 2019 

            
      /s/ Terry R. Miller     

Terry R. Miller (pro hac) 
Mark L. Williams (pro hac) 
Attorneys for Plaintiff 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION 

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