Catch of the Week: Fraud Behind the Silver Screen
This week the SEC announced that it obtained an emergency asset freeze in an enforcement action against L.A.-based actor Zachary Horwitz and his company 1nMM Capital, LLC for allegedly running a $690 million Ponzi scheme. In its complaint, the SEC claimed Horowitz’s recent actions threatened to dissipate the remaining investor funds in his possession. While this story is still technically “mid-catch,” the emergency asset freeze is an important victory in the SEC’s enforcement action against Horowitz.
A Familiar Scheme
According to the SEC’s complaint, Horowitz allegedly convinced investors to purchase promissory notes in his company 1nMM (short for One in a Million) and then misappropriated the funds for his own personal use. 1nMM was purportedly in the business of acquiring and licensing distribution rights for primarily Latin American movies to major media companies like Netflix and HBO. The SEC claims Horowitz has no experience in this work and that he used fabricated movie distribution agreements to convince investors of his prior deals with HBO and Netflix. It also alleges Horowitz used the investor capital to fund a cartoonishly lavish lifestyle involving a $5.7 million luxury home, trips to Las Vegas, high-end automobiles, chartered jet flights, celebrity interior design services, and a luxury watch subscription. After defaulting on outstanding notes—reflecting more than $234 million in unreturned principal—Horowitz allegedly fabricated email communications with HBO representatives and fake collections accounts to convince investors that HBO and Netflix were responsible for the delayed payments.
Whistleblowers Can Stop Investment Fraud
Ponzi schemes are named after legendary 1920s swindler Charles Ponzi. It is believed that Ponzi was inspired by an earlier bookkeeper-turned-con-artist who ran a similar scheme. This brand of fraud is nothing new, and as the SEC’s recent enforcement actions reflect, they’re likely to continue. Whistleblowers, however, can play an important role in combatting this kind of financial and investment fraud by disclosing possible federal securities law violations to the SEC through its Whistleblower Program. If the information provided by the whistleblower leads to a successful SEC action with sanctions totaling over $1 million, the whistleblower may receive an award of up to 30% of the government’s recovery.
If you would like more information or would like to speak to a member of the Constantine Cannon whistleblower lawyer team, please contact us for a confidential consultation.
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