MIAMI (CN) - The Securities and Exchange Commission claims in court that two biotechnology and nanotechnology research firms bilked at least 77 investors out of total $2.5 million by selling them shares in patents the companies did not possess.
In a federal complaint filed Tuesday in Miami, the agency says Rocky Hatfield and Steve Lovern, the principals of the defendant companies, N1 Technologies Inc. and NanoSave Technologies Inc., carried out the alleged scheme between January 2015 and May 2017.
According to the court filing, this is the second run-in Hatfield has had with the SEC. The agency says it instituted an order against him in February 1996, barring him from participating in any offer of penny stock, after a federal court enjoined him for violations of the anti-fraud and registration provisions of the federal securities laws.
Lovern, the current CEO and director of N1 Technologies or N1 Belize and NanoSave Technologies, was involved in a 1998 Federal Trade Commission action for engaging in a nationwide deceptive scheme where consumers were defrauded through the telemarketing of credit cards, the complaint says.
In the current case, the SEC says, “defendants made materially misleading statements and omissions to investors that N1 Belize and NanoSave planned to sell or license the purported patents to other companies and generate returns anywhere between 200% and 1200% for patent unit investors.”
The agency claims Hatfield drafted misleading sales scripts and Lovern hired unregistered sales agents to “cold-call” investors and convince them to purchase the false patent units.
“Investors were given the option to buy 1 patent unit, representing a 1% ownership of the patent, or a fractional patent unit in each patent,” the complaint says.
The SEC alleges that the investor funds collected from the sale of the purported patent units were deposited in NanoSave and N1 Technologies’ bank accounts, and then were transferred to accounts controlled by Hatfield and Lovern so that they could use them for personal expenses and pay undisclosed commissions to sales agents.
“Defendants misrepresented that N1 Belize and NanoSave actually owned or otherwise were issued valid patents when, in fact, neither company nor Hatfield himself has ever been issued any patents by the U.S. Patent and Trademark Office,” the complaint says.
The agency also says that N1 Belize and NanoSave falsely claimed on their quarterly reports and press releases that were posted on OTC Markets Group that they owned the bogus patents.
The Securities and Exchange Commission seeks injunctive relief for violations of the Securities and Exchange Act.
It’s represented by in-house attorneys Alejandro Soto and Jordan Cortez in Miami, Fla.
Representatives of NanoSave Technologies did not immediately respond to emailed and phoned requests for comment on the litigation.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.