SEC v. CRYSTAL WORLD HOLDINGS, INC.; THE NEW SPORTS ECONOMY INSTITUTE; and CHRISTOPHER PAUL RABALAIS, No. 1:19-cv-02490, District of Columbia (Feb. 10, 2025) — Complaint

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SECURITIES AND EXCHANGE COMMISSION
100 F Street NE
Washington, DC 20549,

    Plaintiff,

v.

CRYSTAL WORLD HOLDINGS, INC.
1701 Pennsylvania Ave NW Ste. 300
Washington, DC 20006
(202) 294-5308,

THE NEW SPORTS ECONOMY INSTITUTE
833 N. Garfield Avenue
Pasadena, CA 91104
(202) 294-5308,

and

CHRISTOPHER PAUL RABALAIS
833 N. Garfield Avenue
Pasadena, CA 91104
(202) 294-5308

    Defendants,

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CIVIL NO. 1:19-cv-2490
 
COMPLAINT
Plaintiff Securities and Exchange Commission alleges:
I.    INTRODUCTION
1. The Commission brings this action to enjoin Defendants Crystal World Holdings,
Inc. (“CWH”), The New Sports Economy Institute (“NSEI”) and Christopher Paul Rabalais
(“Rabalais”) from violating the registration and antifraud provisions of the federal securities laws.
From no later than July 2014 through at least April 2019, Defendants raised almost $1.5 million

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from hundreds of individuals in the United States and across the world through the unregistered
offer and sale of securities in CWH.  In addition, in the offer and sale of those securities,
Defendants also made material misrepresentations and engaged in practices which operated as a
deceit upon the purchasers of the securities.
2. Rabalais, through CWH and NSEI, sold unregistered shares of CWH stock to the
public without a valid exemption from registration.  Rabalais described the payments by investors
for CWH shares as “donations” to NSEI, a nonprofit entity he formed and controlled.  He told
investors the CWH shares were “gifts” granted in exchange for those “donations.”
3. Rabalais touted at various times that CWH stock was about to be registered with
the Commission and stressed the importance of buying the stock before registration made it
valuable.  These solicitation statements were materially false and misleading because Defendants
never took any steps to register CWH shares with the Commission.
4. As a result of the conduct alleged in this Complaint, Defendants violated Sections
5 and 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77e and 77q(a).  Unless
restrained  and  enjoined,  Defendants  are  reasonably  likely  to  continue  to  violate  the  federal
securities laws.
5. The Commission therefore respectfully requests the Court enter: (i) a permanent
injunction restraining and enjoining Defendants from violating the federal securities laws; (ii) a
permanent  injunction  restraining and  enjoining  Defendants  from engaging  in  certain  further
conduct; (iii) an order directing Defendants to pay disgorgement with prejudgment interest on a
joint and several basis; and (iv) an order directing Defendants to pay civil money penalties.

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II.   DEFENDANTS
6. CWH is a Wyoming corporation organized by Rabalais in 2014 with its principal
office located in Washington, DC.  CWH is the holding company and owner of all intellectual
property  related  to  the  experimental  sports  marketplace  website  platform  known  as
AllSportsMarket (“ASM”) and found at www.allsportsmarket.com.  ASM describes itself as “an
experimental marketplace” that allows individuals to “buy & sell shares of your favorite sports
teams in a 24-hour, worldwide marketplace” and “earn money when your stocks perform well.”
ASM was founded by Rabalais in hopes of making “sports an asset class.”  His stated goal was for
ASM to become a regulated exchange and the platform for the offer of sports trading instruments
to the investing public.
7. NSEI is a Texas 501(c)(3) non-profit corporation organized by Rabalais in 2011
with its principal office located in Pasadena, CA.  NSEI operates the ASM platform pursuant to a
royalty-free intellectual property licensing agreement with CWH.
8. Rabalais, age 49, is a resident of Pasadena, CA and Humble, TX, and the founder,
president, principal, managing member, managing director and/or general partner of CWH and
NSEI.  During the relevant time period, Rabalais directed or controlled the business activities and
affairs of CWH and NSEI, using both companies’ offices and financial accounts in connection
with the transactions described herein, and both companies functioned as his alter ego.
III.   JURISDICTION AND VENUE
9. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §
1331, and Sections 20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d) and
77v(a).

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10. The Court has personal jurisdiction over Defendants and venue is proper in this
District pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and 28 U.S.C. § 1391,
because, among other things, some or all of the acts and transactions in which Defendants engaged
and that constitute violations of the federal securities laws occurred in this District, and because
CWH maintains its principal office in this District.
11. In connection with the conduct alleged in this Complaint, Defendants, directly and
indirectly, singly or in concert with others, have made use of the means or instrumentalities of
interstate commerce, the means or instruments of transportation or communication in interstate
commerce, the mails, and/or the facilities of a national securities exchange.
IV.   FACTUAL BACKGROUND
 A. Defendants Issue Unregistered Shares of CWH Stock
12. Between July 2014 and April 2019, Rabalais, through CWH and NSEI, publicly
offered and sold at least 4,800 unregistered common and preferred share certificates of CWH to
investors in the United States, Canada, Europe, and Australia.  The shares were marketed through
various “solicitation program” emails.  Rabalais authored these emails and sent them to mailing
lists  compiled  from  individuals  who  had  registered  on  the  NSEI website,  previously  made
payments to NSEI for other programs, and/or previously received CWH shares.  The texts of these
solicitation emails also were posted publicly on the NSEI website and on the community forum of
the ASM website, both of which were accessible to NSEI and ASM members.
13. Rabalais sent the solicitation emails in his dual role as managing director of NSEI
and president and director of CWH, using an email address with an email domain associated with
NSEI.    The  solicitation  emails  were  marked  as  copyrighted  by  CWH  and  included  CWH’s
principal mailing address in Washington, DC.

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14. Rabalais’ pattern was to release one of these program solicitations when he needed
funding to operate the ASM platform and NSEI.
15. In the solicitation emails, Rabalais consistently and misleadingly described CWH
shares as “gifts” issued in exchange for “donations” of money to NSEI when, in reality, the
transactions constituted sales of unregistered securities for value based on offers by the Defendants
without a valid exemption from registration.
16. The CWH shares were securities.  Rabalais viewed CWH shares as traditional stock
and as equity interests that would have real value when the ASM platform became a regulated
stock market.  Rabalais planned to allow for transferability of CWH shares once the shares were
registered with the Commission and intended to grant voting rights to preferred shareholders at
some point in the future.
17. At no point during the time period that Defendants offered and sold CWH shares
using this gift-donation model, however, did they register the shares with the Commission or file
offering documents; no registration statement was filed or in effect as to the shares; and no valid
exemption from registration was available.  Indeed, Defendants offered and sold the shares to
unaccredited investors across the United States and around the world, and Defendants had no
mechanism or process in place to evaluate prospective investors or determine whether those
investors qualified as accredited.
18. Investors  purchased  their  CWH  shares  via  the  internet,  with  payments  made
primarily to PayPal accounts in the names of NSEI and CWH.  These PayPal accounts were owned
and controlled exclusively by Rabalais.  Between July 2014 and March 2019, these accounts
received at least $1,321,818, which corresponded to the issuance of at least 87,292,710 common
shares and 143,068,510 preferred shares of CWH shares.  Rabalais was the sole recipient of the

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funds paid through these accounts, and furthermore, he controlled the U.S. bank accounts to which
these PayPal funds were often moved.
19. Between July 2014 and March 2019, Rabalais also separately received payments of
at least $122,363 directly to U.S. bank accounts that he controlled, which corresponded to the
issuance of 5,388,000 common CWH shares and 101,147,188 preferred CWH shares.  During this
same  time  period,  Rabalais  further  received  additional  payments  of  approximately  $26,900
through  a  Google  Pay  account  that  he  controlled,  which  corresponded  to  the  issuance  of
approximately 270,000 CWH shares.
20. In April 2019, Defendants issued approximately 763,300 additional CWH shares
using the same solicitation methodology described herein.  On information and belief, Defendants
received additional funds from investors for these shares.
B.    Defendants’ Material Misrepresentations Regarding CWH Stock
21. At  various  times  between  July  2014  and  April  2019,  to  induce  investors  to
participate in the share offerings and purchase CWH stock, Rabalais falsely touted the CWH shares
were about to be registered with the Commission, stressing the importance of buying the stock
before registration made it valuable.
22. For example, a June 2017 program solicitation email, prominently bearing the
official Commission seal (without authorization from the Commission), stressed the importance
of making a donation and obtaining shares as soon as possible: “This weekend we will finalize the
shareholder registry in preparation for submission to the S.E.C. as required by law and this is the
last shot at FREE PREFERRED SHARES.”  The program offer included 25,000 “free” common
shares in CWH and 5,000 “free” preferred shares.  Other emails concerning the same program
established that these were offered in exchange for a “donation” of $250.

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23. In addition to the solicitation program emails, in most of the cover emails he sent
to purchasers when transmitting their CWH share certificates, Rabalais promised registration of
the CWH shares.  Rabalais also directly told individual CWH shareholders at various points
throughout  the  relevant  time  period,  often  in  response  to  questions  about  the  value  and
transferability of the CWH shares, that registration was happening soon.  Rabalais used an email
domain associated with NSEI when sending these transmittal emails.
24. The  supposed  registration  of  CWH  stock  was  especially  important  because
Rabalais consistently instructed CWH shareholders that their shares could not be transferred and
had to be held by the initial recipient until registration occurred.
25. The following chart summarizes the written misrepresentations Rabalais made
directly, or through NSEI and CWH, to then-current and prospective CWH shareholders:
Date Statement
9/1/2014 to
12/2016
“When  I  receive  [your  email  confirmation],  your  shares  will  be
recorded in the official stock database that will be used to register your
shares with the Securities and Exchange Commission.”
9/14/2014
“No transfers allowed at this point.  That must happen after S.E.C.
registration sometime next year.”
10/3/2014
“At this point, shares can only move from the treasury to the proper
owner.  You will be able to gift shares once they are registered with the
S.E.C., which is scheduled for some time in 2015.”
9/13/2015
“We will register the stockholders with the S.E.C. once this process is
done.  I’ll look to do this early 2016 after we close the claims.”
10/7/2015
“There is no imminent IPO.  We will be registering the stock with the
S.E.C. next year.”
10/25/2015
“In early 2016, we will register the holding company stock with the
S.E.C.  This is the first step to prepare a liquidity vehicle (private
market first) for out [sic] stockholders.”
10/27/2015
“We’ve been carefully putting everything in order so that our company
stock can be registered with the S.E.C. early next year.”
4/27/2017
“Have you ever had a missed opportunity in your life? . . . The lesson
here is that you can’t put things off anymore . . . About 97% of the
direct holdings via common and preferred stock are gone . . .  If you
know someone who might be interested, this is their last chance before
we lock the shareholder registry.”

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Date Statement
6/30/2017
“This weekend we will finalize the shareholder registry in preparation
for the submission to the S.E.C. as required by law and this is the last
shot at FREE PREFERRED SHARES.”  [The SEC’s official seal was
displayed alongside this statement.]
10/6/2017
“You sell your stock once it is registered with the SEC (expected in a
year or less).”

26. These representations and written statements concerning the registration of CWH
stock were false and misleading.  Defendants never took any steps during the relevant time period
to register the CWH shares, and as alleged above, the shares were never registered with the
Commission.   Moreover, by April 2017, Rabalais still did not even know how to register securities
with the Commission, writing in an email to another CWH investor: “[w]e need to find out the
process of registering the shares.”
27. Rabalais should have known that his statements about registering securities with
the  Commission,  and  the  timeline  for  doing  so,  were  misleading since  he  did  not  have  an
understanding as to how such registration was achieved.
C.   Defendants Deceive Investors as to the Nature of their Investment
28. The gift-donation model employed by Defendants presented a false appearance of
fact regarding the CWH share offering.  Rabalais told investors they were receiving a gift in
exchange for a charitable donation, rather than purchasing unregistered securities.  The purchasers
were not told that registration of the stock was necessary to comply with the securities laws.
Rabalais should have known that structuring the CWH stock offering to appear as charitable
donations could mislead investors.
29. Rabalais furthered the false appearance of fact regarding CWH share registration
by including the Commission’s seal in his June 30, 2017 solicitation email which gave the
misleading impression to prospective investors that the Commission was actively engaged with

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Rabalais and had approved his actions.  Rabalais should have known that no such engagement or
approval had been obtained.
30. Rabalais also drafted or approved language on the NSEI and ASM websites that
conveyed and reinforced the misimpression that Defendants were engaged with the Commission.
Since at least November 2017, the website of the ASM platform has stated that ASM and NSEI
intend to “collaborate with the SEC and other regulatory agencies, as needed, through a continuous
and  transparent  dialogue  .  .  .  .”    While  Rabalais  may  have  intended  to  engage  in  such  a
collaboration  or  “dialogue”  with  the  Commission  or  Commission  staff,  to  date,  no  such
collaboration or dialogue has occurred with respect to the issuance of CWH shares.  Rabalais
should have known at the time he disseminated the information that no such collaboration or
dialogue had even been initiated.
31. Rabalais’  dissemination  to  investors  and  prospective  investors of  the  material
misstatements reflected on the chart above also presented a false appearance of fact.  At the time
he made many of those statements, Rabalais did not know how to register the stock and had taken
no action to do so.  At a minimum, he should have known how the registration process worked
before making these representations to investors.  He also should have known that registration
would not occur in the timeframe he stated.
32. While Rabalais may have hoped to get the CWH stock registered at some point, he
had no understanding of the registration process and had not taken any steps toward registration at
the  time  many  of  those  statements  were  disseminated,  rendering the  statements  false  and
misleading.

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COUNT I
Sale of Unregistered Securities in Violation of Sections 5(a) and 5(c) of the Securities Act
(Against All Defendants)
33. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint.
34. No registration statement was filed or in effect with the Commission pursuant to
the Securities Act with respect to the securities and transactions described in this Complaint and
no exemption from registration exists with respect to these securities and transactions.
35. Defendants directly or indirectly (a) made use of any means or instruments of
transportation or communication in interstate commerce or of the mails to sell securities through
the use or medium of a prospectus or otherwise; (b) carried or caused to be carried securities
through the mails or in interstate commerce, by any means or instruments of transportation, for the
purpose  of  sale  or  delivery  after  sale;  and  (c)  made  use  of  any  means  or  instruments  of
transportation or communication in interstate commerce or of the mails to offer to sell or offer to
buy through the use or medium of any prospectus or otherwise, any securities without a registration
statement having been filed or being in effect with the Commission as to such securities.
36. By  reason  of  the  foregoing,  Defendants  violated,  and,  unless  enjoined,  are
reasonably likely to continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§
77e(a) and 77e(c).
COUNT II
Fraud in Violation of Section 17(a)(2) of the Securities Act
(Against All Defendants)
37. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint.

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38. Defendants, in the offer or sale of any securities by the use of any means or
instruments of transportation or communication in interstate commerce or by use of the mails,
directly or indirectly knowingly, recklessly or negligently obtained money or property by means
of untrue statements of material facts or omissions to state material facts necessary to make the
statements made, in the light of the circumstances under which they were made, not misleading.
39. By  reason  of  the  foregoing,  Defendants  violated,  and,  unless  enjoined,  are
reasonably likely to continue to violate, Section 17(a)(2) of the Securities Act, 15 U.S.C. §
77q(a)(2).
COUNT III
Fraud in Violation of Section 17(a)(3) of the Securities Act
(Against All Defendants)
40. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint.
41. Defendants, in the offer or sale of any securities by the use of any means or
instruments of transportation or communication in interstate commerce or by use of the mails,
directly or indirectly knowingly, recklessly or negligently engaged in transactions, practices or
courses of business which operated or would have operated as a fraud or deceit upon the purchasers
and of such securities.
42. By  reason  of  the  foregoing,  Defendants  violated,  and,  unless  enjoined,  are
reasonably likely to continue to violate, Section 17(a)(3) of the Securities Act, 15 U.S.C. §
77q(a)(3).
RELIEF REQUESTED
WHEREFORE,  the  Commission  respectfully  requests  the  Court  find  Defendants
committed the violations charged, and enter Judgments:

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I.
Permanent Injunctions
Permanently  restraining  and  enjoining  Defendants,  their  officers,  agents,  servants,
employees, attorneys, and all persons in active concert or participation with them, and each of
them, from directly or indirectly violating the federal securities laws alleged in this Complaint;
and further permanently restraining and enjoining Defendants, their officers, agents, servants,
employees, attorneys, and all persons in active concert or participation with them, and each of
them, from directly or indirectly, including, but not limited to, through any entity owned or
controlled by any of them, participating in the issuance, purchase, offer, or sale of any security in
an unregistered offering by an issuer, provided, however, that such injunction shall not prevent
Rabalais from purchasing or selling securities for his own personal account or accounts that he
controls.
II.
Disgorgement
Ordering Defendants to disgorge, with prejudgment interest, on a joint and several basis,
all ill-gotten gains received as a result of the acts or courses of conduct alleged in this Complaint.
III.
Penalties
Ordering  Defendants  to  pay  civil  money  penalties  pursuant  to  Section  20(d)  of  the
Securities Act, 15 U.S.C. § 77t(d).

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IV.
Further Relief
Granting  such  other  and  further  relief  as  the  Court  determines to  be  necessary  and
appropriate.
V.
Retention of Jurisdiction
Further, the Commission respectfully requests the Court retain jurisdiction over this action
and over Defendants in order to implement and carry out the terms of all orders and decrees that
may hereby be entered, or to entertain any suitable application or motion by the Commission for
additional relief within the jurisdiction of this Court.
JURY DEMAND

Plaintiff demands a trial by jury as to all claims so triable.

DATED:  August 19, 2019 Respectfully submitted,
SECURITIES AND EXCHANGE COMMISSION
 By:  /s/ Patrick R. Costello
     Patrick R. Costello (Florida Bar No. 75034)
Attorney for Plaintiff
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-5949
Telephone: (202) 551-3982
Fax: (202) 772-9282
Email: [email protected]
Appearing pursuant to LCvR 83.2(e)

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OF COUNSEL:

Melissa R. Hodgman (Appearing pursuant to LCvR 83.2(e))
Ivonia Slade (Appearing pursuant to LCvR 83.2(e))
Charles Davis (D.C. Bar No. 341438)
Michael Flanagan (D.C. Bar No. 985580)
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-5949

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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF COLUMBIA 

 

SECURITIES AND EXCHANGE COMMISSION 
100 F Street NE 
Washington, DC 20549, 
 
    Plaintiff, 
 
v. 
 
CRYSTAL WORLD HOLDINGS, INC. 
1701 Pennsylvania Ave NW Ste. 300 
Washington, DC 20006 
(202) 294-5308, 
 
THE NEW SPORTS ECONOMY INSTITUTE 
833 N. Garfield Avenue 
Pasadena, CA 91104 
(202) 294-5308,  
 
and 
 
CHRISTOPHER PAUL RABALAIS 
833 N. Garfield Avenue 
Pasadena, CA 91104 
(202) 294-5308 
 
    Defendants, 
 

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CIVIL NO. 1:19-cv-2490 

 

COMPLAINT  

Plaintiff Securities and Exchange Commission alleges: 

I. INTRODUCTION 

1. The Commission brings this action to enjoin Defendants Crystal World Holdings, 

Inc. (“CWH”), The New Sports Economy Institute (“NSEI”) and Christopher Paul Rabalais 

(“Rabalais”) from violating the registration and antifraud provisions of the federal securities laws.  

From no later than July 2014 through at least April 2019, Defendants raised almost $1.5 million 

Case 1:19-cv-02490   Document 1   Filed 08/19/19   Page 1 of 14



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from hundreds of individuals in the United States and across the world through the unregistered 

offer and sale of securities in CWH.  In addition, in the offer and sale of those securities, 

Defendants also made material misrepresentations and engaged in practices which operated as a 

deceit upon the purchasers of the securities. 

2. Rabalais, through CWH and NSEI, sold unregistered shares of CWH stock to the 

public without a valid exemption from registration.  Rabalais described the payments by investors 

for CWH shares as “donations” to NSEI, a nonprofit entity he formed and controlled.  He told 

investors the CWH shares were “gifts” granted in exchange for those “donations.” 

3. Rabalais touted at various times that CWH stock was about to be registered with 

the Commission and stressed the importance of buying the stock before registration made it 

valuable.  These solicitation statements were materially false and misleading because Defendants 

never took any steps to register CWH shares with the Commission. 

4. As a result of the conduct alleged in this Complaint, Defendants violated Sections 

5 and 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77e and 77q(a).  Unless 

restrained and enjoined, Defendants are reasonably likely to continue to violate the federal 

securities laws. 

5. The Commission therefore respectfully requests the Court enter: (i) a permanent 

injunction restraining and enjoining Defendants from violating the federal securities laws; (ii) a 

permanent injunction restraining and enjoining Defendants from engaging in certain further 

conduct; (iii) an order directing Defendants to pay disgorgement with prejudgment interest on a 

joint and several basis; and (iv) an order directing Defendants to pay civil money penalties. 

 

 

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II. DEFENDANTS 

6. CWH is a Wyoming corporation organized by Rabalais in 2014 with its principal 

office located in Washington, DC.  CWH is the holding company and owner of all intellectual 

property related to the experimental sports marketplace website platform known as 

AllSportsMarket (“ASM”) and found at www.allsportsmarket.com.  ASM describes itself as “an 

experimental marketplace” that allows individuals to “buy & sell shares of your favorite sports 

teams in a 24-hour, worldwide marketplace” and “earn money when your stocks perform well.”  

ASM was founded by Rabalais in hopes of making “sports an asset class.”  His stated goal was for 

ASM to become a regulated exchange and the platform for the offer of sports trading instruments 

to the investing public. 

7. NSEI is a Texas 501(c)(3) non-profit corporation organized by Rabalais in 2011 

with its principal office located in Pasadena, CA.  NSEI operates the ASM platform pursuant to a 

royalty-free intellectual property licensing agreement with CWH. 

8. Rabalais, age 49, is a resident of Pasadena, CA and Humble, TX, and the founder, 

president, principal, managing member, managing director and/or general partner of CWH and 

NSEI.  During the relevant time period, Rabalais directed or controlled the business activities and 

affairs of CWH and NSEI, using both companies’ offices and financial accounts in connection 

with the transactions described herein, and both companies functioned as his alter ego. 

III. JURISDICTION AND VENUE 

9. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 

1331, and Sections 20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d) and 

77v(a). 

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10. The Court has personal jurisdiction over Defendants and venue is proper in this 

District pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and 28 U.S.C. § 1391, 

because, among other things, some or all of the acts and transactions in which Defendants engaged 

and that constitute violations of the federal securities laws occurred in this District, and because 

CWH maintains its principal office in this District. 

11. In connection with the conduct alleged in this Complaint, Defendants, directly and 

indirectly, singly or in concert with others, have made use of the means or instrumentalities of 

interstate commerce, the means or instruments of transportation or communication in interstate 

commerce, the mails, and/or the facilities of a national securities exchange.    

IV. FACTUAL BACKGROUND 

 A. Defendants Issue Unregistered Shares of CWH Stock 

12. Between July 2014 and April 2019, Rabalais, through CWH and NSEI, publicly 

offered and sold at least 4,800 unregistered common and preferred share certificates of CWH to 

investors in the United States, Canada, Europe, and Australia.  The shares were marketed through 

various “solicitation program” emails.  Rabalais authored these emails and sent them to mailing 

lists compiled from individuals who had registered on the NSEI website, previously made 

payments to NSEI for other programs, and/or previously received CWH shares.  The texts of these 

solicitation emails also were posted publicly on the NSEI website and on the community forum of 

the ASM website, both of which were accessible to NSEI and ASM members.   

13. Rabalais sent the solicitation emails in his dual role as managing director of NSEI 

and president and director of CWH, using an email address with an email domain associated with 

NSEI.  The solicitation emails were marked as copyrighted by CWH and included CWH’s 

principal mailing address in Washington, DC. 

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14. Rabalais’ pattern was to release one of these program solicitations when he needed 

funding to operate the ASM platform and NSEI. 

15. In the solicitation emails, Rabalais consistently and misleadingly described CWH 

shares as “gifts” issued in exchange for “donations” of money to NSEI when, in reality, the 

transactions constituted sales of unregistered securities for value based on offers by the Defendants 

without a valid exemption from registration.  

16. The CWH shares were securities.  Rabalais viewed CWH shares as traditional stock 

and as equity interests that would have real value when the ASM platform became a regulated 

stock market.  Rabalais planned to allow for transferability of CWH shares once the shares were 

registered with the Commission and intended to grant voting rights to preferred shareholders at 

some point in the future. 

17. At no point during the time period that Defendants offered and sold CWH shares 

using this gift-donation model, however, did they register the shares with the Commission or file 

offering documents; no registration statement was filed or in effect as to the shares; and no valid 

exemption from registration was available.  Indeed, Defendants offered and sold the shares to 

unaccredited investors across the United States and around the world, and Defendants had no 

mechanism or process in place to evaluate prospective investors or determine whether those 

investors qualified as accredited.    

18. Investors purchased their CWH shares via the internet, with payments made 

primarily to PayPal accounts in the names of NSEI and CWH.  These PayPal accounts were owned 

and controlled exclusively by Rabalais.  Between July 2014 and March 2019, these accounts 

received at least $1,321,818, which corresponded to the issuance of at least 87,292,710 common 

shares and 143,068,510 preferred shares of CWH shares.  Rabalais was the sole recipient of the 

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funds paid through these accounts, and furthermore, he controlled the U.S. bank accounts to which 

these PayPal funds were often moved. 

19. Between July 2014 and March 2019, Rabalais also separately received payments of 

at least $122,363 directly to U.S. bank accounts that he controlled, which corresponded to the 

issuance of 5,388,000 common CWH shares and 101,147,188 preferred CWH shares.  During this 

same time period, Rabalais further received additional payments of approximately $26,900 

through a Google Pay account that he controlled, which corresponded to the issuance of 

approximately 270,000 CWH shares. 

20. In April 2019, Defendants issued approximately 763,300 additional CWH shares 

using the same solicitation methodology described herein.  On information and belief, Defendants 

received additional funds from investors for these shares. 

B. Defendants’ Material Misrepresentations Regarding CWH Stock  

21. At various times between July 2014 and April 2019, to induce investors to 

participate in the share offerings and purchase CWH stock, Rabalais falsely touted the CWH shares 

were about to be registered with the Commission, stressing the importance of buying the stock 

before registration made it valuable.   

22. For example, a June 2017 program solicitation email, prominently bearing the 

official Commission seal (without authorization from the Commission), stressed the importance 

of making a donation and obtaining shares as soon as possible: “This weekend we will finalize the 

shareholder registry in preparation for submission to the S.E.C. as required by law and this is the 

last shot at FREE PREFERRED SHARES.”  The program offer included 25,000 “free” common 

shares in CWH and 5,000 “free” preferred shares.  Other emails concerning the same program 

established that these were offered in exchange for a “donation” of $250. 

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23. In addition to the solicitation program emails, in most of the cover emails he sent 

to purchasers when transmitting their CWH share certificates, Rabalais promised registration of 

the CWH shares.  Rabalais also directly told individual CWH shareholders at various points 

throughout the relevant time period, often in response to questions about the value and 

transferability of the CWH shares, that registration was happening soon.  Rabalais used an email 

domain associated with NSEI when sending these transmittal emails. 

24. The supposed registration of CWH stock was especially important because 

Rabalais consistently instructed CWH shareholders that their shares could not be transferred and 

had to be held by the initial recipient until registration occurred.   

25. The following chart summarizes the written misrepresentations Rabalais made 

directly, or through NSEI and CWH, to then-current and prospective CWH shareholders: 

Date Statement 

9/1/2014 to 
12/2016 

“When I receive [your email confirmation], your shares will be 
recorded in the official stock database that will be used to register your 
shares with the Securities and Exchange Commission.” 

9/14/2014 
“No transfers allowed at this point.  That must happen after S.E.C. 
registration sometime next year.” 

10/3/2014 
“At this point, shares can only move from the treasury to the proper 
owner.  You will be able to gift shares once they are registered with the 
S.E.C., which is scheduled for some time in 2015.” 

9/13/2015 
“We will register the stockholders with the S.E.C. once this process is 
done.  I’ll look to do this early 2016 after we close the claims.” 

10/7/2015 
“There is no imminent IPO.  We will be registering the stock with the 
S.E.C. next year.” 

10/25/2015 
“In early 2016, we will register the holding company stock with the 
S.E.C.  This is the first step to prepare a liquidity vehicle (private 
market first) for out [sic] stockholders.” 

10/27/2015 
“We’ve been carefully putting everything in order so that our company 
stock can be registered with the S.E.C. early next year.” 

4/27/2017 

“Have you ever had a missed opportunity in your life? . . . The lesson 
here is that you can’t put things off anymore . . . About 97% of the 
direct holdings via common and preferred stock are gone . . .  If you 
know someone who might be interested, this is their last chance before 
we lock the shareholder registry.” 

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Date Statement 

6/30/2017 

“This weekend we will finalize the shareholder registry in preparation 
for the submission to the S.E.C. as required by law and this is the last 
shot at FREE PREFERRED SHARES.”  [The SEC’s official seal was 
displayed alongside this statement.] 

10/6/2017 
“You sell your stock once it is registered with the SEC (expected in a 
year or less).” 

 

26. These representations and written statements concerning the registration of CWH 

stock were false and misleading.  Defendants never took any steps during the relevant time period 

to register the CWH shares, and as alleged above, the shares were never registered with the 

Commission.   Moreover, by April 2017, Rabalais still did not even know how to register securities 

with the Commission, writing in an email to another CWH investor: “[w]e need to find out the 

process of registering the shares.”   

27. Rabalais should have known that his statements about registering securities with 

the Commission, and the timeline for doing so, were misleading since he did not have an 

understanding as to how such registration was achieved. 

C. Defendants Deceive Investors as to the Nature of their Investment 

28. The gift-donation model employed by Defendants presented a false appearance of 

fact regarding the CWH share offering.  Rabalais told investors they were receiving a gift in 

exchange for a charitable donation, rather than purchasing unregistered securities.  The purchasers 

were not told that registration of the stock was necessary to comply with the securities laws.  

Rabalais should have known that structuring the CWH stock offering to appear as charitable 

donations could mislead investors. 

29. Rabalais furthered the false appearance of fact regarding CWH share registration 

by including the Commission’s seal in his June 30, 2017 solicitation email which gave the 

misleading impression to prospective investors that the Commission was actively engaged with 

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Rabalais and had approved his actions.  Rabalais should have known that no such engagement or 

approval had been obtained. 

30. Rabalais also drafted or approved language on the NSEI and ASM websites that 

conveyed and reinforced the misimpression that Defendants were engaged with the Commission.  

Since at least November 2017, the website of the ASM platform has stated that ASM and NSEI 

intend to “collaborate with the SEC and other regulatory agencies, as needed, through a continuous 

and transparent dialogue . . . .”  While Rabalais may have intended to engage in such a 

collaboration or “dialogue” with the Commission or Commission staff, to date, no such 

collaboration or dialogue has occurred with respect to the issuance of CWH shares.  Rabalais 

should have known at the time he disseminated the information that no such collaboration or 

dialogue had even been initiated. 

31. Rabalais’ dissemination to investors and prospective investors of the material 

misstatements reflected on the chart above also presented a false appearance of fact.  At the time 

he made many of those statements, Rabalais did not know how to register the stock and had taken 

no action to do so.  At a minimum, he should have known how the registration process worked 

before making these representations to investors.  He also should have known that registration 

would not occur in the timeframe he stated.   

32. While Rabalais may have hoped to get the CWH stock registered at some point, he 

had no understanding of the registration process and had not taken any steps toward registration at 

the time many of those statements were disseminated, rendering the statements false and 

misleading. 

 

 

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COUNT I 

Sale of Unregistered Securities in Violation of Sections 5(a) and 5(c) of the Securities Act 

(Against All Defendants) 

33. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint. 

34. No registration statement was filed or in effect with the Commission pursuant to 

the Securities Act with respect to the securities and transactions described in this Complaint and 

no exemption from registration exists with respect to these securities and transactions. 

35. Defendants directly or indirectly (a) made use of any means or instruments of 

transportation or communication in interstate commerce or of the mails to sell securities through 

the use or medium of a prospectus or otherwise; (b) carried or caused to be carried securities 

through the mails or in interstate commerce, by any means or instruments of transportation, for the 

purpose of sale or delivery after sale; and (c) made use of any means or instruments of 

transportation or communication in interstate commerce or of the mails to offer to sell or offer to 

buy through the use or medium of any prospectus or otherwise, any securities without a registration 

statement having been filed or being in effect with the Commission as to such securities. 

36. By reason of the foregoing, Defendants violated, and, unless enjoined, are 

reasonably likely to continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 

77e(a) and 77e(c). 

COUNT II 

Fraud in Violation of Section 17(a)(2) of the Securities Act 

(Against All Defendants) 

37. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint. 

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38. Defendants, in the offer or sale of any securities by the use of any means or 

instruments of transportation or communication in interstate commerce or by use of the mails, 

directly or indirectly knowingly, recklessly or negligently obtained money or property by means 

of untrue statements of material facts or omissions to state material facts necessary to make the 

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

39. By reason of the foregoing, Defendants violated, and, unless enjoined, are 

reasonably likely to continue to violate, Section 17(a)(2) of the Securities Act, 15 U.S.C. § 

77q(a)(2). 

COUNT III 

Fraud in Violation of Section 17(a)(3) of the Securities Act 

(Against All Defendants) 

40. The Commission repeats and realleges Paragraphs 1 through 32 of its Complaint. 

41. Defendants, in the offer or sale of any securities by the use of any means or 

instruments of transportation or communication in interstate commerce or by use of the mails, 

directly or indirectly knowingly, recklessly or negligently engaged in transactions, practices or 

courses of business which operated or would have operated as a fraud or deceit upon the purchasers 

and of such securities. 

42. By reason of the foregoing, Defendants violated, and, unless enjoined, are 

reasonably likely to continue to violate, Section 17(a)(3) of the Securities Act, 15 U.S.C. § 

77q(a)(3). 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests the Court find Defendants 

committed the violations charged, and enter Judgments: 

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I. 

Permanent Injunctions 

Permanently restraining and enjoining Defendants, their officers, agents, servants, 

employees, attorneys, and all persons in active concert or participation with them, and each of 

them, from directly or indirectly violating the federal securities laws alleged in this Complaint; 

and further permanently restraining and enjoining Defendants, their officers, agents, servants, 

employees, attorneys, and all persons in active concert or participation with them, and each of 

them, from directly or indirectly, including, but not limited to, through any entity owned or 

controlled by any of them, participating in the issuance, purchase, offer, or sale of any security in 

an unregistered offering by an issuer, provided, however, that such injunction shall not prevent 

Rabalais from purchasing or selling securities for his own personal account or accounts that he 

controls. 

II. 

Disgorgement 

Ordering Defendants to disgorge, with prejudgment interest, on a joint and several basis, 

all ill-gotten gains received as a result of the acts or courses of conduct alleged in this Complaint. 

III. 

Penalties 

Ordering Defendants to pay civil money penalties pursuant to Section 20(d) of the 

Securities Act, 15 U.S.C. § 77t(d). 

 

 

 

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IV. 

Further Relief 

Granting such other and further relief as the Court determines to be necessary and 

appropriate. 

V. 

Retention of Jurisdiction 

Further, the Commission respectfully requests the Court retain jurisdiction over this action 

and over Defendants in order to implement and carry out the terms of all orders and decrees that 

may hereby be entered, or to entertain any suitable application or motion by the Commission for 

additional relief within the jurisdiction of this Court. 

JURY DEMAND 
  

Plaintiff demands a trial by jury as to all claims so triable. 
 
 
 
 
DATED:  August 19, 2019 Respectfully submitted, 

SECURITIES AND EXCHANGE COMMISSION 

 By: /s/ Patrick R. Costello 

  Patrick R. Costello (Florida Bar No. 75034) 
Attorney for Plaintiff 
Securities and Exchange Commission 
100 F Street NE 
Washington, DC 20549-5949 
Telephone: (202) 551-3982 
Fax: (202) 772-9282 
Email: [email protected] 
Appearing pursuant to LCvR 83.2(e) 

 
 
 
 
 

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OF COUNSEL: 
 
Melissa R. Hodgman (Appearing pursuant to LCvR 83.2(e)) 
Ivonia Slade (Appearing pursuant to LCvR 83.2(e)) 
Charles Davis (D.C. Bar No. 341438) 
Michael Flanagan (D.C. Bar No. 985580) 
Securities and Exchange Commission 
100 F Street NE 
Washington, DC 20549-5949 
 
 

 

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