False Advertising Ends in Bankruptcy
Advertising can be important to any business. Telling the public about a line of products or services being offered is typically designed to inform people about the products or services available to draw in customers or clients for the firm, generating profits for its owners.
Untruthful advertising can have the opposite effect. It can, and often does, draw customers and clients to a business. While the business may make money, at least for awhile, the customers and clients do not receive value. Examples of the negative impact of false advertising are everywhere – think of greenwashing, or falsely claiming that the business focuses on environmental principles when it does not, or offering fraudulent securities that may be worthless.
One of the Commission’s most recent cases in this area is SEC v. Pereira, Civil Action No. 1:24-cv-20757 (S.D. Fla. Filed February 27, 2024). Named as defendant is Paul A. Periera, a resident of Miami who co-founded a firm later renamed Alfi, Inc. The firm purportedly focused on advertising technology which was used to measure and generate reporting on audience presence, demographics and responses to digital advertising. It shares were eventually listed on NASDAQ.
In May 2021 the company’s Form S-1 registration statement went effective. The company reportedly raised over $17 million. Investors also exercised warrants in the following months which brought the firm another $16 million. Alfi became a “meme stock.” Its share price vacillated from an opening price of $3.60 to as high as $22 per share. The price was volatile.
By June 2021 Mr. Pereira began posting materially false statements about the company on Stocktwits. A few days later Alfi filed its first Form 10Q. It reported $17, 450 in revenue. This filing was followed by an interview Mr. Pereira gave reporting a significant but false new business deal.
While Mr. Pereira continued to try and boost the share price of his firm with false advertising, his efforts failed. By late October the Board of Directors placed him on administrative leave and authorized an independent internal investigation. Eventually Mr. Pereira resigned and the firm was forced to file for Chapter 7 bankruptcy protection. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Section 10(b). The case is in litigation.
False Advertising Ends in Bankruptcy
Advertising can be important to any business. Telling the public about a line of products or services being offered is typically designed to inform people about the products or services available to draw in customers or clients for the firm, generating profits for its owners.
Untruthful advertising can have the opposite effect. It can, and often does, draw customers and clients to a business. While the business may make money, at least for awhile, the customers and clients do not receive value. Examples of the negative impact of false advertising are everywhere – think of greenwashing, or falsely claiming that the business focuses on environmental principles when it does not, or offering fraudulent securities that may be worthless.
One of the Commission’s most recent cases in this area is SEC v. Pereira, Civil Action No. 1:24-cv-20757 (S.D. Fla. Filed February 27, 2024). Named as defendant is Paul A. Periera, a resident of Miami who co-founded a firm later renamed Alfi, Inc. The firm purportedly focused on advertising technology which was used to measure and generate reporting on audience presence, demographics and responses to digital advertising. It shares were eventually listed on NASDAQ.
In May 2021 the company’s Form S-1 registration statement went effective. The company reportedly raised over $17 million. Investors also exercised warrants in the following months which brought the firm another $16 million. Alfi became a “meme stock.” Its share price vacillated from an opening price of $3.60 to as high as $22 per share. The price was volatile.
By June 2021 Mr. Pereira began posting materially false statements about the company on Stocktwits. A few days later Alfi filed its first Form 10Q. It reported $17, 450 in revenue. This filing was followed by an interview Mr. Pereira gave reporting a significant but false new business deal.
While Mr. Pereira continued to try and boost the share price of his firm with false advertising, his efforts failed. By late October the Board of Directors placed him on administrative leave and authorized an independent internal investigation. Eventually Mr. Pereira resigned and the firm was forced to file for Chapter 7 bankruptcy protection. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Section 10(b). The case is in litigation.