(CN) – The Securities and Exchange Commission has charged now-defunct sports betting company Bettor Investments LLC with fraud for allegedly selling unregistered securities.
The SEC’s complaint in the U.S. District Court of Nevada against Nevada-based Bettor Investments and its manager and lone employee, Matthew C. Stuart, alleges he began operating the business in September 2015 after Nevada enacted Bill 443 (NSVB 443). The bill allowed people or entities to “solicit and collect funds from investors anywhere in the world, aggregate those funds in a Nevada bank, place wagers on sporting events, and apportion profits and losses among investors,” the complaint states.
According to the complaint, beginning in March 2016, Bettor Investments raised roughly $145,000 from 70 investors in more than 20 states to wage on sports events – without SEC registration – but lost about $42,000 from bad bets. The SEC claims that Stuart did not tell investors that he lost their money, but, to the contrary, misled them into believing they were up in value, allegedly sending notices to some investors convincing them that the value of their investments had increased.
By November 2016, Stuart returned some of the investors’ funds, but also began operating outside of the scope of Bill 443 by allowing investors to convert the remaining investments into promissory notes that guaranteed 14% rates of return. Stuart, however, allegedly failed to inform investors of the previous gambling losses, how the losses would be divvied amongst investors, how Stuart would be paid and how the funds were used.
The SEC claims Stuart knew that a significant portion of investor money had been lost, and that Bettor Investments could not reasonably have the funds available when the promissory notes became due. Subsequently, Stuart failed to repay any of the investors when the notes came due in January and February of 2018.
Stuart and Bettor Investments are charged with selling unregistered securities and fraud under the Securities Act and the Securities Exchange Act.
The SEC is represented by Robert F. Schroeder and M. Graham Loomis in Atlanta, Ga.