The Securities and Exchange Commission today charged 12 companies and six individuals with defrauding investors in a scheme involving applications to the Federal Communications Commission (FCC) for cellular spectrum licenses.
According to the SEC’s complaint filed in federal district court in Arizona, David Alcorn and Kent Maerki orchestrated the offering fraud through Janus Spectrum LLC, a Glendale, Ariz.-based company they founded and managed. Janus Spectrum held itself out as a service provider that prepares cellular spectrum license applications on behalf of third parties. The complaint alleges that although Alcorn and Maerki had third parties offer and sell securities based on the licenses to investors, they were personally involved in presentations to investors and Maerki appeared in misleading videos, including one called “Money from Thin Air.”
The SEC alleges that investors in the scheme were promised potentially lucrative returns based on Janus Spectrum obtaining FCC licenses in the Expansion Band and Guard Band portions of the 800 megahertz (MHz) band. Janus Spectrum and the fundraising entities claimed that investors could profit because Sprint and other major wireless carriers needed licenses in this spectrum. In fact, the value of the licenses was small because this spectrum cannot support cellular systems and is generally used for “push-to-talk” services for local law enforcement or businesses like pizza delivery companies that require less bandwidth.
“Janus Spectrum and its fundraising entities allegedly engaged in the unregistered offer and sale of securities in violation of the federal securities laws and repeatedly lied to investors regarding the value and use of the FCC licenses,” said Michele W. Layne, Director of the SEC’s Los Angeles Regional Office.
The SEC’s complaint alleges that the scheme raised more than $12.4 million from investors from May 2012 to October 2014. The fundraising entities funneled a significant percentage of the investors’ funds to Janus Spectrum, which used only a small portion to prepare applications for FCC licenses. The complaint alleges that instead, all of the individuals in the scheme kept a significant portion of investor funds for personal use.
Four individuals and 11 companies were named as fundraising entities:
- Daryl G. Bank of Port St. Lucie, Fla., and his companies Dominion Private Client Group LLC, Janus Spectrum Group LLC, Spectrum Management LLC, Spectrum 100 LLC, Spectrum 100 Management LLC, Prime Spectrum LLC and Prime Spectrum Management LLC all based in Virginia Beach, Va.
- Bobby D. Jones of Phoenix and his company Premier Spectrum Group PMA, a Texas private membership association based in Phoenix.
- Terry W. Johnson of Heath, Texas and Raymon G. Chadwick Jr. of Grand Prairie, Texas and their companies Innovative Group PMA, Premier Group PMA and Prosperity Group PMA, Texas private membership associations based in Grand Prairie, Texas or Heath, Texas.
As alleged in the SEC’s complaint, in conducting this fraudulent scheme and lying to investors, Janus Spectrum, Alcorn, Maerki, Bank, Jones, Johnson, Chadwick, and the fundraising entities violated the antifraud provisions and the securities registration provisions of the federal securities laws, and Janus Spectrum and all six individuals violated the broker-dealer registration provisions.
The SEC’s investigation was conducted by Sana Muttalib and Lorraine Pearson and supervised by Victoria A. Levin of the Los Angeles office. The litigation will be handled by Sam Puathasnanon. The SEC appreciates the assistance of the Texas State Securities Board and the Federal Communications Commission.