Three women who run a Lancaster-based beverage company have been ordered to pay more than $14 million in fines over three years for allegedly defrauding and misleading investors, according to the Securities and Exchange Commission. .
Sea Beverage Company and its executives, Lupe L. Rose, 54, and Sonya F. Shelby, 60, of Palmdale, and Katherine Durden, 48, of Lancaster, were arrested on Thursday. He was ordered to pay the full amount within 30 days, as ordered by the federal district court. For the Central District of California.
The company was assessed a $12 million fine and $739,000 in prejudgment interest. Rose was required to pay an additional $669,687, and Shelby and Darden were each fined an additional $334,842.
Calls to phone numbers listed for Shelby and Darden were not returned.
Mr. Rose was arrested last week after a federal grand jury indicted that he took more than $13.5 million from more than 1,000 investors. A trial is scheduled for March 19th.
Rose presented a 34-minute YouTube video in response. Rose said in her filing that she had endured “grave injustice, including racism, discrimination, and a targeted campaign orchestrated by the Securities and Exchange Commission.” She claimed that she had spent more than $1 million on her legal defense and had “depleted the resources to sustain a legal battle.”
He said the SEC never took into account “all of my legitimate business expenses,” and thus “incorrectly portrays the company and its subsidiaries as tokens.” Rose claimed the government ignored business expenses, including salaries for 20 employees, marketing and promotion, utilities, trademarks, rent for five locations, travel expenses, and research and development.
A call to the SEC's media department was not immediately returned.
SEC filed initial report Civil Litigation September 14, 2021. The agency claimed that from 2017 to 2019, Sea Beverage raised more than $15 million through the sale of unregistered stock to more than 2,000 customers and investors nationwide.
The commission wrote that the company “misrepresented to investors” that 30% of the funds would be allocated to purchasing beverages. About 2% was actually spent on beverages, while “at least $7.5 million” was redirected to pay for “cars and trucks, rent, luxury retail items, and trips to casinos,” the complaint alleges.
According to the commission, the three executives withdrew $6 million in cash and remittances, of which $1.2 million was spent on casinos, the purchase of eight cars and trucks for personal use, and loan repayments on Shelby's Porsche. He said he spent $180,000 on it. .
Other expenses alleged by the SEC included $100,000 in lease payments for a home and $50,000 on luxury items such as Gucci and Louis Vuitton bags.
The commission said the founders “exaggerated and misrepresented” the company's earnings in order to trick people into investing. The SEC alleges in its lawsuit that Sea Beverage informed investors that the company had built a brewery even though construction was not complete, and that Sea Beverage was marketing its own branded bottled water as “proprietary” and “FDA-approved.” He claimed that the company had falsely advertised that it was. The three told investors that they had invested “millions of their own money” into the company, but their share was “more modest.” The defendants also claimed that outsiders were interested in acquiring the company for hundreds of millions of dollars. The SEC said there were no offers.
The commission also alleges that executives told investors that an initial public offering was “imminent” before the paperwork had even begun.
According to commission filings, Sea Beverage marketed itself as a “women-owned beverage company” and sold beer, wine, spirits and bottled water to women.
According to the commission, from 2018 to 2019, Mr. Rose, Mr. Shelby and Mr. Darden hosted three to four in-person meetings with investors. They provided samples of their products and directly solicited investors, according to the SEC.