2021
ARK Invest and its founder and CEO, Cathie Wood, have been generating considerable attention with their bets on innovative, disruptive technologies. The company is an investment adviser for certain exchange traded funds and registered with the Securities & Exchange Commission. The ARK Innovation ETF – an exchange-traded fund with shares listed on the NASDAQ – became increasingly popular with retail investors during the pandemic as its securities rose in price from around $52 in February 2020 to almost $160 in February 2021.
Bad actors are taking notice.
Securities Commissioner Travis J. Iles entered an emergency cease and desist order to stop an unregistered person from impersonating ARK Invest and the ARK Innovation ETF. The order accuses the individual of leveraging public interest in ARK Invest and the ARK Innovation ETF to bait-and-switch investors with fraudulent securities issued by an unrelated unincorporated entity.
“These types of impersonation and false affiliation schemes are a masquerade and pose a significant threat to retail investors. The false associations are designed to mislead investors on promises of extraordinary profits and induce them into entrusting their money toward an investment that is something that it is not,” said Commissioner Iles.
According to the order, Nick Cuban advertised investments to residents of San Antonio, Texas. His advertisement purported to be published by ARK Invest and it used the firm’s logo to promote a cryptocurrency product supposedly generating profits of 40% per month. The advertisement encouraged investors to quickly act upon the opportunity, playing on COVID-19, stimulus payments, a potential economic meltdown and FOMO – an acronym for Fear Of Missing Out.
Cuban is not affiliated with ARK Invest or the ARK Innovation ETF, according to the order. Instead, he’s actually a sales agent for Keye Midas Wealth Management Worldwide.
“Bait-and-switch schemes are near the top of the playbook for swindlers,” said Joe Rotunda, Enforcement Director. “Scammers often promote something that seems attractive and legitimate, then pressure victims to purchase an unrelated fraudulent product.” He added that investors should never feel pressured to invest their money and should instead carefully, cautiously investigate all opportunities.
Keye Midas allegedly claims to be a domestic firm that specializes in stocks, bonds, real estate, forex and cryptocurrency mining. The order accuses it of illegally soliciting investments in various unregistered investment plans – referred to as the Great Mogul, Excelsior, Idol’s Eye and Regent opportunities. According to the order, Keye Midas is touting the profitability of these investment plans, promising to pay returns of up to 80% over terms as short as six months.
These products are purportedly accompanied by money-back guarantees – suggesting the securities have little or no risk.
It’s a fraudulent scheme, according to the order. The action names Keye Midas and Cuban, as well as Roberto Joseph Raimondo, Lilian Swift, Christie Raimondo Gabbiadini aka Christie Raimondo and Nicolas E. Biangel – the managers of Keye Midas. The order also names Anna Lefcovitch, an agent of Keye Midas, and Alan Rozich, who allegedly serves as its Sustainability Science and Technology Consultant.
Although Keye Midas holds itself out as a sophisticated investment advisory firm, according to the order it is the financial equivalent of a ghost – an unincorporated business taking steps to conceal its actual physical location and managed by people taking steps to conceal their actual physical location.
For example, Keye Midas is allegedly telling investors it is a Rhode Island company with offices in Pennsylvania, Utah and California. The Rhode Island Department of State does not, however, have any records reflecting its incorporation in Rhode Island. It is also not organized with Secretaries of State in Pennsylvania, Utah and California. Although it is providing physical addresses, these physical addresses allegedly are two residences and a performing arts theater – not registered offices or data farms.
While Cuban is accused of impersonating ARK Invest and the ARK Innovation ETF, Rozich is accused of misleading investors about the legitimacy of the scheme. According to the order, he is suggesting Keye Midas is compliant with the United States Securities and Exchange Commission and that he takes steps to make sure “our friends at the SEC are happy.”
The parties are not registered to offer or sell securities in Texas. The investment plans are not registered or permitted for sale in Texas.
The parties have 30 days to challenge the order.
Contact: Joe Rotunda, Director of Enforcement, Texas State Securities Board, at jrotunda@ssb.texas.gov.