Online Casino Firm Accused of Fraud
A federal judge in Los Angeles issued an order Wednesday to halt business at a Sherman Oaks online casino company as regulators accused the firm of defrauding 152 investors out of more than $2 million by promising huge returns from a planned gambling Web site.
U.S. District Judge Mariana Pfaelzer also froze the bank accounts of the company and its managers. Officials at the Securities and Exchange Commission said the company had only $278,000 left, and held out little chance that the investors would fully recover their losses.
A complaint initially filed under seal by the SEC alleges that Internet Casino Sports Gaming Inc. misled investors with the lure of 581% returns on their investment. Authorities said the company mailed out newsletters stoking investors’ hopes that it would be purchased by an existing casino company or be offered for public sale, opening the door to untold wealth.
The actions came as part of a joint federal-state crackdown on swindles in the entertainment industry, an effort that has thrown the spotlight on movie productions, cable programming and other glitzy investments that may not be what they seem.
The rise in show biz-related fraud, authorities said, is a tribute to the well-publicized success of films such as “Titanic,” and the expansion of Las Vegas resorts and other gambling venues.
“Whenever you see something new, you’re going to see the fraudsters,” said SEC spokeswoman Lisa Gok.
Ventures in California, Utah and New York are now the subject of six other lawsuits filed by the SEC and the Federal Trade Commission, which also participated in the crackdown.
State securities agencies from Hawaii to Florida have issued dozens of cease and desist orders that require suspect companies to stop calling for business in particular states or face criminal prosecution.
Internet Casino had drawn such an order from Pennsylvania regulators. California authorities prompted the SEC to investigate the firm, the agency said.
SEC officials said 15 telemarketers from the casino company had been calling potential investors from a “boiler room” phone bank on Van Nuys Boulevard, and another three or four phone salesmen had been soliciting from their homes. The investment was also promoted on the Internet.
Robert Matias, 35, of Granada Hills, the company’s president, worked the phones himself as a “closer,” a high-pressure salesman who completes sales with hesitant investors, the SEC alleged. Matias also used the name Robert DuVall, the agency said.
Alan Lenchner, 62, also of Granada Hills, helped oversee the telemarketing operation and managed the firm, according to the SEC allegations.
A prospectus mailed to investors said the company planned to raise $6 million for its sports book Web site, to be based offshore in the Dominican Republic.
SEC officials said the firm did establish a Web site but that it offers primarily Las Vegas-style card games involving “play money,” and that 90% of the investors’ money had gone to other costs, including commissions up to 40% for the telemarketers, and a Mercedes-Benz sports utility vehicle for Matias’ wife.
Neither Matias nor Lenchner returned calls seeking comment.
Internet Casino was one of several Los Angeles area firms subject to state “cease and desist” orders recently.
Pennsylvania regulators filed such action against Spooky House Entertainment, a firm developing a Halloween-themed movie from Beverly Hills and La Jolla. Iowa authorities issued an order against Woodland Hills-based Tri-Star Capital Management, which was touting a 13-part documentary purportedly to be marketed to the Discovery Channel. No one from either company returned calls Wednesday.
