A fintech startup founder is in hot water again as the Securities and Exchange Commission (SEC) has charged him with fraud for baiting investors into funding shell companies instead of the startup they had been promised.
Filed in Portland, Maine, last month by the SEC, the 66-page complaint alleges that the fintech start-up Mozido’s Michael Liberty, his wife, Brittany Liberty, his cousin, Richard Liberty, Paul Hess, and attorney George Marcus convinced 200 investors to put a combined $55 million into unregistered interests in shell companies Michael had owned. Although Michael had told investors the shell companies had owned transferable interests in Mozido, the shell companies were either not allowed to transfer interests in Mozido or did not own any interests in the Austin-based mobile payments startup.
The SEC alleges the 57-year-old founder used the funds for private jet flights, luxury homes and cars, a dairy farm, and a movie his wife was producing before they were married.
According to the complaint, Liberty and his accomplices “lied to investors about Mozido’s valuation and finances, the amount Michael Liberty had personally invested in Mozido, and the use of their funds.”
Mizodo, which Liberty had once claimed was worth more than $100 billion, offers white-label, cloud-based mobile payments across all industries which include financial institutions.
The filing charges the lot with violating anti-fraud and registration provisions of federal securities laws, specifically Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5. A majority of the group also violated Sections 5(a) and 5(c) of the Securities Act while Hess and Richard have been charged with violating Section 15(a) of the Exchange Act.
Michael Liberty has been hit with SEC charges as early as 2006, when the Commission accused him and accomplices of partaking in a $9 million fraud plot with a Philadelphia-based venture capital fund and its investors. In November 2016, Liberty was convicted for making illegal campaign contributions. He was released from federal prison in January.