Dive Brief:

• The Securities and Exchange Commission (SEC) obtained a restraining order and asset freeze against the CFO, CEO and COO of Nanotech Engineering Inc., a California solar panel company, for allegedly defrauding more than 100 investors.
• The SEC alleges the executives, while raising capital to fund Nanotech’s development of solar panels using nanotechnology, diverted more than $2.4 million of investor funds for personal expenses, including two Maserati sports cars, a yacht, and cosmetic surgery. 
• The complaint also alleges the defendants concealed from investors a prior felony securities fraud conviction of the CFO, Michael Sweaney, also known as Michael Hatton.​

Dive Insight:

The SEC accuses the company of paying commissions to unlicensed stockbrokers in a "boiler-room"-type environment to cold-call prospects. "Investors were convinced to invest by dubious claims of a patent-pending invention that would change the world," the SEC said.

The company collected at least $9.4 million from September 2017 to last October, including $2 million from one investor. 

The SEC said the company misled investors on how it would use their money and also by identifying the CFO as Michael Hatton rather than Michael Sweaney. 

"In February 1998, Michael Sweaney pleaded guilty to one count of felony securities fraud in Nevada state court," said the SEC. He was "ordered to pay restitution to ten investors, and was sentenced to a 12-to-32-month suspended prison sentence, suspended in favor of two years of probation. Despite efforts to hide his true identity from Nanotech investors, Michael Sweaney has listed his legal name on multiple Nanotech bank forms."

Antonia Chion, associate director of the SEC’s Division of Enforcement, said the agency's action is intended to halt an egregious fraud. "The emergency relief we obtained on behalf of investors prevents the dissipation of the defendants’ assets," he said. 

The three executives are charged with violating antifraud provisions of federal securities laws. The SEC is seeking emergency relief as well as permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties. The complaint also names entities controlled by the defendants, Nanotech Finance LLC, Omni Golf LLC, and 3 Dragons LLC, as relief defendants.