SEC Files Suit Against and Reaches Settlement with Digital Ad Company

By the Constantine Cannon Whistleblower Team

On December 15, the Securities and Exchange Commission (SEC) filed a lawsuit in federal court against social media and digital advertising company Curastory Inc. and its founder and CEO, Tiffany Kelly, and concurrently moved the court to approve a judgment in accordance with the parties’ settlement.[1]  This is yet another example of the SEC bringing an enforcement proceeding alleging that a startup company and leadership crossed the line when raising money from investors.  Let’s dig into the allegations of this one.

What Were the SEC’s Allegations Against Curastory and Kelly?

Curastory was a startup social media company that “sought to match advertisers with content creators who could be hired to embed advertisements within videos they published to social media.”[2]  The core allegation of the SEC’s complaint is that Curastory and Kelly defrauded investors by falsely depicting Curastory as a successful and profitable company when it wasn’t.[3]

According to the SEC’s complaint, Curastory and Kelly raised nearly $3 million from investors by “making materially false and misleading statements about the financial performance and committed investments” of the company.  Those allegedly false and misleading statements included telling investors (i) “that [Curastory] had earned hundreds of thousands, if not millions, of dollars in revenue”; (ii) “that Curastory had secured or lined-up million-dollar investments from other investors”; and (iii) “that a growing base of advertisers used Curastory’s platform.”[4]  In addition, the SEC alleged Kelly “forged the signature of a prospective investor” on an investor term sheet.[5]  The SEC’s complaint references a number of emails and other communications with investors that allegedly contained false and misleading statements about Curastory’s revenue, projections, and commitments from other investors.[6]

In contrast to those rosy representations, the SEC alleged a starkly different reality, one in which Curastory (i) “generated little revenue” during the relevant year – “far less than the amounts Defendants described to investors”; (ii) “did not obtain the seven-figure investments it touted to investors”; (iii) and “[did not] have as customers the advertisers it claimed.”[7]

One paragraph in particular powerfully summarizes the SEC’s allegations:  “Investors were misled into believing Curastory was a growing and successful business that was on track to make millions and had secured additional investments from large private equity firms.  In reality, Curastory generated little revenue during the Relevant Period from only approximately 20 advertisers.  As of January 2024, Curastory also owed approximately $930,000 to its vendors, and Kelly had exhausted all funds raised from investors during the Relevant Period.  To-date, investors have received nothing in return for their investment.”[8]

The allegedly defrauded investors included many hundreds of investors through crowdfunding platforms, as well as “a global startup accelerator and venture capital firm”; “an investment firm that targets early-stage sports technology businesses”; “a global investment platform, focusing on sports startups”; and “a global talent, sports, entertainment, and advisory company.”[9]

What Was the Agreed Upon Settlement?

On the same day the SEC filed its complaint, it also filed a consent motion asking the court to enter final judgment as to the Defendants consistent with the parties’ settlement agreement.

In the consent motion, the SEC claims the remedies under the settlement include (i) Kelly paying a civil penalty of $125,000; (ii) “restrain[ing] and enjoin[ing] Kelly for 10 years … from directly or indirectly … participating in the issuance, purchase, offer, or sale of any security,” except for her own personal accounts; (iii) “bar[ring Kelly] for 10 years … from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act.”[10]

The SEC Whistleblower Reward Program

To help protect investors and securities markets, the SEC has a whistleblower reward program.  Eligible whistleblowers may report anonymously through attorneys and may receive up to 30% of a monetary recovery.  To learn more about the SEC Whistleblower Program and recent news, read our articles here and here.

Constantine Cannon Has Significant Experience Helping SEC Whistleblowers

Our firm represents whistleblowers under the SEC’s Whistleblower Program.  According to Constantine Cannon partner Dan Vitelli, “The SEC Whistleblower Program is a very powerful tool to help the SEC enforce securities laws and protect investors and markets.  The SEC is looking for people aware of possible violations of securities laws to come forward, and the program offers awards to incentivize them to do so.”

For questions about whistleblowing or if you think you have a potential case, please contact Constantine Cannon’s Whistleblower Team for a free and confidential consultation.

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Sources:

[1] See SEC v. Kelly and Curastory Inc., No. 1:25-cv-6876 (E.D.N.Y.), ECF No. 1 (Compl.); SEC v. Kelly and Curastory Inc., No. 1:25-cv-6876 (E.D.N.Y.), ECF No. 3 (Consent Motion for Judgment According to Settlement).

[2] SEC v. Kelly and Curastory Inc., No. 1:25-cv-6876 (E.D.N.Y.), ECF No. 1 (Compl.) ¶¶ 1, 16.

[3] See, e.g., id. ¶¶ 1, 20, 26, 28-55.

[4] Id. ¶¶ 1-2.

[5] Id. ¶ 1.

[6] Id. ¶¶ 29-55.

[7] Id. ¶ 3.

[8] Id. ¶ 63.

[9] Id. ¶¶ 10-15, 20, 22.

[10] SEC v. Kelly and Curastory Inc., No. 1:25-cv-6876 (E.D.N.Y.), ECF No. 3 (Consent Motion for Judgment According to Settlement) ¶ 4.

Tagged in: SEC Whistleblower Reward Program, Securities Fraud, securities violations,