The SEC charged two New York promoters with attempting to profit from the popularity of the Broadway hit, Hamilton, and other hot event tickets. In a civil action filed in the U.S. District Court for the Southern District of New York, the SEC charged that Joseph Meli and Matthew Harriton, along with entities they controlled, ran a Ponzi scheme that raised at least $81 million from at least 125 investors. In addition to the typical requests for injunctive relief, disgorgement and civil penalties, the Commission is seeking emergency preliminary relief, including a temporary restraining order against further securities law violations and an emergency asset freeze.
As part of the alleged scam, the defendants signed a "funding agreement" with prospective investors that promised a 10 percent return on their original investment within eight months. In that agreement, the defendants falsely represented that they had an agreement with the producers of Hamilton to purchase 35,000 tickets. The defendants claimed that the investor funds would be used to pay part of the cost of obtaining the tickets, which would then be resold at a significant profit. The defendants had no legitimate agreement with the Hamilton producers to purchase tickets to the musical, and they made no Hamilton ticket purchases with these funds received from investors. Meli and Harriton also had no other legitimate source of business revenue to produce the promised returns to the investors.
As alleged, the entities controlled by Meli and Harriton spent only about 10 percent of the funds raised on payments to third parties that might be connected with ticket-selling businesses. The SEC claimed that the defendants used a significant percentage of the funds to pay individuals who made earlier investments in the companies. The defendants characterized these payments as returns on the investments made by those individuals, but as the SEC claimed, the $48 million paid to earlier investors could not be attributed to any legitimate business activity.
Meli and Harriton also allegedly spent almost $2 million of investor funds to buy jewelry and to make other retail purchases. According to the SEC, they also used investor funds for payments to casinos and to pay private school and camp tuitions.
The complaint also named Meli’s wife as a relief defendant in the complaint for the purposes of recovering investor funds allegedly in her possession, as one of the controlled entities paid Jessica Ingber Meli approximately $136,800. There was no evidence that she provided any services in exchange for these payments, alleged the SEC, and the defendants did not disclose the payments made to investors. As stated in the complaint, "Jessica Ingber Meli had no legitimate interest in, or right to, the funds she received and which funds represented proceeds of the fraudulent scheme."
Paul G. Levenson, director of the SEC’s Boston Regional Office, stated that "Meli and Harriton raised millions from investors by promising big profits from reselling tickets to A-list events when in reality they were moving investor money in a circle and creating a mirage of profitability."
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced the filing of criminal charges against Joseph Meli.
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