The former CEO, CFO, and Director of a publicly traded healthcare services company have been charged with defrauding investors out of over $200m in connection with a merger designed to convert the company into a private entity.
All three men were charged with conspiracy to commit securities fraud and securities fraud. One of the men has already been arrested.
According to the government’s complaint, the three men ran an elaborate scheme to defraud a private investment company, and several banks, in connection with the funding of a transaction to make a company that was traded on the London Stock Exchange private. To fund this transition, the investment company put up over $80m in equity and several financial institutions took on over $130m in debt. The scheme tricked investors and grossly overvalued the company. The name of the company has not been made public. The defendants also tried to raise millions in public markets to fund the company’s acquisitions of various subsidiaries.
Defendants allegedly funneled the investments into their control and used to money for a variety of purposes that had nothing to do with the plans they described to investors. Instead, they used the money to fake the revenue stream of the potential subsidiary. To cover up the fraud, the defendants allegedly created fake customer profiles and doctored bank statements. These steps caused the investment firm to value the company at over $300m. The company has since gone bankrupt.
In addition to the criminal charges, the government has also filed a complaint seeking forfeiture of the defendants’ assets, including personal property.
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