SEC v. LottoNet Operating Corp.; David Gray; and Joseph A. Vitale, No. LR-23791 (Mar. 27, 2017) — Press Release
raw: LottoNet Operating Corp., et al.
LottoNet Operating Corp., et al., No. LR-23791 (Mar. 27, 2017)
LottoNet Operating Corp
LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale are accused of conducting a boiler room scheme, misrepresenting investments in a business facilitating online lottery ticket sales. The alleged fraud involved raising $4.8 million from investors, with only $10,525.43 paid in returns, while sales agents received over $1.1 million in commissions. Vitale, who raised $1.4 million, allegedly used an alias to hide his permanent FINRA ban. The SEC obtained an emergency court order freezing their assets, and charges are pending.
LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale are accused of conducting a boiler room scheme, misrepresenting investments in a business facilitating online lottery ticket sales. The alleged fraud involved raising $4.8 million from investors, with only $10,525.43 paid in returns, while sales agents received over $1.1 million in commissions. Vitale, who raised $1.4 million, allegedly used an alias to hide his permanent FINRA ban. The SEC obtained an emergency court order freezing their assets, and charges are pending. The U.S. Securities and Exchange Commission charged LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale with operating a boiler room scheme that raised approximately $4.8 million from investors by falsely claiming the funds would be used to develop an online lottery ticket platform, while concealing that over 35% of proceeds went to sales commissions. The defendants allegedly misled investors with fabricated promises of monthly dividends up to $8,500 on $25,000 investments and falsely touted a “worst-case” 60% return, when in fact only $10,525 in returns had been paid out by February 2017. Vitale, who raised at least $1.4 million under the alias “Donovan Kelly” to evade his FINRA ban, and other sales agents received over $1.1 million in commissions, while the company diverted funds for personal expenses including weddings, clothing, and strip clubs. The SEC obtained an emergency asset freeze and filed fraud charges, with its investigation ongoing and assistance from FINRA. The U.S. Securities and Exchange Commission (SEC) charged LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale with operating a boiler room scheme that raised approximately $4.8 million from investors by falsely claiming the funds would be used to develop an online lottery ticket platform, while concealing that over 35% of proceeds went to sales commissions. The defendants misled investors with fabricated promises of $8,500 monthly dividends on $25,000 investments and a “worst-case” 60% return upon sale, when in reality only $10,525 in returns had been paid out by February 2017. Vitale, who raised at least $1.4 million under the alias “Donovan Kelly” to evade his FINRA ban, and others used investor funds for personal expenses including clothing, weddings, and strip clubs, with over $1.1 million paid to sales agents. The SEC obtained an emergency asset freeze and filed fraud charges, with the investigation ongoing and led by Miami office staff, supported by FINRA.
Extracted insights
- $4.80M $4.8 million $1M–$10M
- $1.40M $1.4 million $1M–$10M
- $1.10M $1.1 million $1M–$10M
- $25K $25,000 $10K–$100K
- $11K $10,525 $10K–$100K
- $9K $8,500 <$10K
- agency Securities and Exchange Commission
- organization Securities and Exchange Commission
- Securities and Exchange Commission announced charges against LottoNet Operating Corp., its CEO, and its top sales agent for conducting a boiler room scheme soliciting investments in online and cell phone sales of lottery tickets
- Securities and Exchange Commission announced charges against LottoNet Operating Corp., its CEO, and its top sales agent
- LottoNet Operating Corp., its CEO, and its top sales agent conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states
- Securities and Exchange Commission announced charges LottoNet Operating Corp., et al.
- LottoNet Operating Corp., et al. conducting boiler room scheme investments in online and cell phone sales of lottery tickets
- Securities and Exchange Commission halts boiler room scheme
- CEO and top sales agent accused of conducting boiler room scheme
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 23791 / March 27, 2017 Securities and Exchange Commission v. LottoNet Operating Corp., et al., Case No. 17-cv-21033-Lenard/Goodman (S.D. Fla.) SEC HALTS BOILER ROOM SCHEME INVOLVING STATE LOTTERY TICKETS The Securities and Exchange Commission today announced charges against a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states. The SEC has obtained an emergency court order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale. The SEC's complaint alleges that they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions. At least 35 percent of investor proceeds were allegedly paid to boiler room sales agents in the form of commissions, and LottoNet allegedly siphoned investor funds for personal spending on clothing, wedding-related expenses, and strip clubs. According to the SEC's complaint, which was unsealed in federal court today, among the pitches used in sales agent scripts prepared for cold calls to investors was "you're looking at a monthly dividend payout of $8,500 every month" on a $25,000 investment if LottoNet reaches 1 percent market share. The scripts also allegedly touted the purported safety of the investment, noting a 60 percent return as a "worst case" scenario if the company was ever sold. The SEC alleges that while LottoNet has raised a total of approximately $4.8 million from investors, the company had only paid $10,525.43 in investment returns to investors through the end of February. Sales agents allegedly have been paid more than $1.1 million out of investor funds. The SEC's complaint further alleges that Vitale, who personally raised at least $1.4 million from investors, used the alias Donovan Kelly in an apparent attempt to hide from investors that he is permanently barred by the Financial Industry Regulatory Authority (FINRA). The SEC's investigation, which is continuing, has been conducted in the Miami office by Kate Zoladz, Gary Miller, and Allen J. Genaldi. The case is being supervised by Elisha L. Frank and the litigation is being led by Amie Riggle Berlin. The SEC appreciates the assistance of FINRA. # # #
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 23791 / March 27, 2017 Securities and Exchange Commission v. LottoNet Operating Corp., et al., Case No. 17-cv-21033-Lenard/Goodman (S.D. Fla.) SEC HALTS BOILER ROOM SCHEME INVOLVING STATE LOTTERY TICKETS The Securities and Exchange Commission today announced charges against a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states. The SEC has obtained an emergency court order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale. The SEC's complaint alleges that they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions. At least 35 percent of investor proceeds were allegedly paid to boiler room sales agents in the form of commissions, and LottoNet allegedly siphoned investor funds for personal spending on clothing, wedding-related expenses, and strip clubs. According to the SEC's complaint, which was unsealed in federal court today, among the pitches used in sales agent scripts prepared for cold calls to investors was "you're looking at a monthly dividend payout of $8,500 every month" on a $25,000 investment if LottoNet reaches 1 percent market share. The scripts also allegedly touted the purported safety of the investment, noting a 60 percent return as a "worst case" scenario if the company was ever sold. The SEC alleges that while LottoNet has raised a total of approximately $4.8 million from investors, the company had only paid $10,525.43 in investment returns to investors through the end of February. Sales agents allegedly have been paid more than $1.1 million out of investor funds. The SEC's complaint further alleges that Vitale, who personally raised at least $1.4 million from investors, used the alias Donovan Kelly in an apparent attempt to hide from investors that he is permanently barred by the Financial Industry Regulatory Authority (FINRA). The SEC's investigation, which is continuing, has been conducted in the Miami office by Kate Zoladz, Gary Miller, and Allen J. Genaldi. The case is being supervised by Elisha L. Frank and the litigation is being led by Amie Riggle Berlin. The SEC appreciates the assistance of FINRA. # # #