An Investment Fraud Was Brewing But…
While crypto fraud, Ponzi schemes and oil and gas scams get the lion’s share of press these days, when a securities fraud defendant ‘s name is Collector’s Coffee d/b/a Collectors Café, we had to take a look. Coffee? How could that wonderful drink that three of five U.S. adults drink daily be part of a financial investment scheme? As it turns out, the coffee part had virtually nothing to do with Mykalai Kontilai’s investment scam. Nevertheless, he was able to con 140 investors out of $23 million while invoking the name of baseball legend, Jackie Robinson.
Originally, Kontilai had an idea to build brick and mortar coffee houses that featured collectible treasures, including sports memorabilia, as its main stock and trade. Very quickly, he discovered that the high costs were out of reach. He changed his plan to establish an online marketplace to auction collectables, provide a social network platform and even add a television show.
The Lies
Kontilai pursued financial investors through several mechanisms including convertible promissory notes and promissory notes, and Series A and B preferred shares. While raising money, Kontilai told many lies, including:
- Announced a growth initiative to produce and distribute in Chinese and Spanish the “Collectors Café’ TV Series and a partnership with Warner Music Group.”
- Communicated to multiple investors that he was not compensated through salary or other means, including describing himself as frugal.
- Claimed the $6 million he misappropriated was repayment of a non-existent $5 million loan to the company.
- Advertised there were “billions of dollars of inventory available on Collectors Café’s website.”
- Boasted that he had “hundreds of dealers signed up.” SEC Complaint
Jackie Robinson
In an obscure whopper of a lie, Kontilai represented to have Jackie Robinson contracts appraised at $36 million. Collectors Café did purchase an interest in two contracts for around two million dollars. However, the best appraisal Kontilai received was for $10 million. And, Collectors Café did not own 100% interest in the contracts. SEC Complaint
The Frugal Expenditures
Through various transfers, Kontilai absconded with over $6 million, which hardly could be evidence of a frugal lifestyle. Some of the purchases and expenditures included “. . . rent on an ocean front 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.” SEC Complaint
Investor Fraud Deception Exposed
In order to cover his tracks with the SEC, Kontilai presented them with a forged employment agreement and a bank statement to prove up a fake loan agreement. The bank statement turned a balance of $1,000 into $5 million. [SEC Complaint]
Kontilai Lies To The SEC And Sues His Investors
Another unusual twist in this tale is a contract for repayment with one investor. Kontilai repaid $750,000, representing half the original investment, promising to repay the balance over time. The investor signed a confidentiality agreement, promising not to communicate with authorities, including the SEC. When the SEC subpoenaed the investor, his lawyer provided the SEC with information. That’s when Kontilai sued investors, not just this one particular investor, 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.” [SEC Complaint] That lawsuit was dismissed without prejudice for failure to effect service.
Need a Investment Fraud Attorney? Contact Us Today
The lies and deception include much more, but you get the point. Ponzi schemes, crypto currency scams, shady oil and gas and real estate deals and straight-up financial investment fraud remain rampant. Do your research before investing. We hope all your real estate, commodities, foreign exchange, crypto-currency and oil and gas investments are safe and profitable. But if you find yourself searching for an experienced investment fraud attorney, oil and gas litigator or a commercial litigation lawyer, we are here to help.
https://www.sec.gov/news/statement/20231214
https://www.sec.gov/files/litigation/complaints/2019/comp-pr2019-227.pdf
https://www.sec.gov/news/press-release/2019-227