SEC Moves Against Cobalt Multifamily LLC
The SEC alleges in its complaint that Cobalt's Offering Memorandum, which were apparently not registered, concealed the fact that the investment scheme was Ponzi, that Shapiro and Stitsky had criminal backgrounds, and that the company was only 2 years old and not 20 years, among other misrepresentations. In further detail, the SEC alleges:
"The Commission's complaint, filed on March 27, alleges that since approximately July 2004, the Company has raised over $16 million from at least 150 investors on the basis of false and misleading offering and marketing materials and through boiler room sales tactics overseen by defendant Stitsky, another convicted felon and a multiple recidivist. According to the Complaint, the defendants: (a) misrepresented Cobalt's track record and ongoing operations; (b) concealed Shapiro's and Stitsky's roles and criminal backgrounds and promoted the false impression that Foster runs the Cobalt; (c) misappropriated at least $2.6 million of investor funds; and (d) operated the Company as a Ponzi scheme, using funds of later investors to pay earlier investors a promised 8% annual return. The Complaint further alleges that the offering is ongoing -- Cobalt has continued to raise funds from investors, even after the execution of search warrants at its offices in December 2005."
I have viewed the Cobalt website, nothing spectacular jumps about it, in either direction. Are there are any simple due diligence steps when reviewing this business opportunities fraud?
Well, several things come to mind quickly:
1. The whois search reveals that the website is around 2 years old.
2. Cobalt Financial, the registrant of the website, is a Delaware company operating in Massachusetts, organized in late November, 2004.
3. The State of Delaware shows that Cobalt Financial was incorporated in late December, 2004.
4. The above three facts are not consistent with website's representations that the company has been in business for over 20 years.
