The owners of a dot-com firm are headed to prison for fraud and conspiracy.
With the help of two stock promoters, father-daughter duo Nasser and Sholeh Hamedani tricked investors into purchasing 2.7 million shares of their company, The Children’s Internet, at a cost of about $5.5 million.
The pair defrauded investors by stating the company’s stock would soon be listed on a national stock exchange and by failing to disclose the 25% commission fees of their brokers. The Hamedanis used the stolen millions for personal expenses, such as luxury automobiles, gambling debts, and expenses, and funneled some back to their other company, Two Dog Net, Inc.
The duo, discovered by the Securities and Exchanges Commission in 2006, was indicted by a federal grand jury for committing conspiracy, securities fraud, false statements to accountants, false books and records, and obstruction of justice. The Hamedanis pled guilty to all charges and also admitted to making false statements while under oath, as well as producing fraudulent documents in order to impede and obstruct the investigation by SEC.
Last week, Nasser Hamedani was sentenced to 25 months in prison by a northern California judge, and Sholeh 20 months. Both were given a two-year term of supervised release and ordered to perform 1,750 hours of community service as part of their release.
SEC also obtained a jury verdict against one of their stock promoters, Cort Poyner of Florida, for selling unregistered securities and acting as an unregistered securities broker.
Wall Street blogger and Forbes contributor Bill Singer isn’t surprised this dynamic family duo burned investors. Since the dot-com boom, pitches for online businesses can be heard from every corner—and often aren’t to be trusted.
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Singer’s found online business owners tend to pitch potential Web traffic and popularity rather than how they’ll handle your clients’ money, often to distract from their lack of credibility. Consequently, Singer urges investors to ask questions.
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When examining social media investments, tread carefully. Singer says there are countless “con artists out there pumping fraudulent companies. The whole online mystique is a dream come true to scamsters with a golden tongue.”