SEC Pursues Offering Fraud Case Involving Telecom Partnerships

One of the most common, if not the most common, forms of fraud handled by the Commission is offering fraud. These schemes exhibit endless patterns and variations. Typically, a fraudster constructs a convincing story that promises investors significant profits and returns from a soon-to-be-launched venture. In some cases, the promised returns are substantial, while in others, they are modest but enticing enough to lure potential investors into risking their savings without raising suspicion. The subject matter of these schemes can vary widely, from straightforward investments like acquiring tickets to sold-out Broadway shows to more sophisticated ventures involving cutting-edge AI technologies that captivate prospective investors. Whatever the focus, the pitch is carefully designed to appeal just enough to attract interest without appearing too good to be true.

The Commission’s latest case of offering fraud demonstrates how such schemes can strike this delicate balance. Over a four-year period, the defendants raised over $22 million through a privately held company used as a front. The case, SEC v. Feller, Civil Action No. 1:24-cv-0896 (S.D.N.Y., filed April 17, 2024), highlights the mechanics of such fraudulent activities.

The defendants named in this case are Paul Feller and Icaro Media Group, Inc., a private company that initially operated under the name Sport 195, Inc. before rebranding. Paul Feller serves as the Chairman and CEO of Icaro. Before this venture, he co-owned Americas of Cronus Equity, LLC.

From 2017 onward, Mr. Feller solicited investments in Icaro, raising more than $22 million from at least 38 investors over four years. His sales pitch was simple yet compelling: he claimed that Icaro was working with two multinational telecom companies to launch or had already launched digital platforms and mobile applications delivering sports content tailored to regional client interests.

While one of these telecom firms did initiate trial projects with Icaro, the collaborations were terminated in 2016. The other firm never launched any projects with Icaro, as the company failed to secure the necessary licenses for the content. Despite these setbacks, Mr. Feller continued his sales pitch, often embellishing it with claims of new developments, such as partnerships with a high-profile business executive and a prominent sportswear brand. None of these alleged transactions materialized.

The complaint alleges violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. The case is currently in litigation. See Lit. Rel. No. 25979 (April 17, 2024).