Securities and Exchange Commission v. Wwebnet, Inc. and Robert L. Kelly, Case No. 12-CV-6581 (S.D.N.Y.). On August 28, the SEC announced fraud charges against Wwebnet, Inc. and its CEO Robert Kelly. Kelly solicited investments from investors to purchase stock issued by Wwebnet through unregistered private placement offerings. Kelly and Wwebnet defrauded investors by misrepresenting and omitting material information about the Company and how it would use investor funds. First, they said that investor money in Wwebnet would be used to develop the Company’s proprietary software system. Kelly misrepresented or failed to disclose to investors the existence of a purported software development contract between Wwebnet and another company that was wholly-owned by Kelly. Kelly assured investors that Wwebnet owned the software and the other company had no role with respect to the software. In reality, Wwebnet paid approximately $2.85 million of investor funds to the other company which, in turn, transferred at least $2.1 million of that amount to Kelly. Second, Defendants told investors that Wwebnet had generated revenue from customer contracts which was untrue because Wwebnet had not generated any revenue from customers. Third, Kelly misrepresented to investors that their money would be used for business purposes, including his salary. Kelly never disclosed that Wwebnet paid $180,000 in investor funds for his personal luxury apartment in New York, or that he was receiving approximately $2.1 million in effective compensation from the purported contract between Wwebnet and his other company.
Wwebnet and Kelly are charged with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Kelly aided and abetted Wwebnet’s violations of the Exchange Act and is liable as a control person under Section 20(a) of the Exchange Act for Wwebnet’s violations. The SEC’s seeks a permanent injunction, pay monetary civil penalties, disgorgement of ill-gotten gains plus prejudgment interest, and imposing a penny stock bar and an officer and director bar against Kelly.