The Securities and Exchange Commission (SEC) has filed fraud charges against Rahulkumar M. Patel regarding an offer of securities that was conducted on an investment crowdfunding site.
According to the SEC, Patel created a company DNA Lodging East Hartford LLC, to renovate and reopen a closed hotel located in East Hartford, Connecticut. Allegedly from October and December 2018, Patel raised $2,750,500 from 70 investors. A Form D was filed with the SEC back in 2018.
The SEC complaint states that Patel claimed that DNA would use $1,465,000 of the proceeds to acquire a lease in the hotel from the property owner but instead Patel acquired the lease from the property owner himself for $540,000 and assigned it to DNA for $1,465,000, and then kept the $925,000 difference.
The complaint claims that investor funds were used for items including “$87,500 in payments to a yacht club, approximately $46,000 on travel and entertainment at casinos and elsewhere; and approximately $14,000 in cash withdrawals.”
The SEC also alleges that Patel concealed his actions from investors in DNA by operating behind several companies, including one that he organized under the same name as the property owner and used to interpose himself in the deal to acquire the hotel lease.
The SEC does not name the crowdfunding platform that apparently hosted the offering.
The SEC seeks an order prohibiting Patel from violating the antifraud provisions, directing him to disgorge ill-gotten gains and to pay prejudgment interest and a civil money penalty. The SEC also seeks an order that would require Patel to provide a copy of any final judgment obtained by the SEC to investors or potential investors under certain circumstances.
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