By Caitlyn Scofield, Spring 2019 IAC Student intern
As millennials come to the age where they are investing, they often follow the old mantra stick to what you know and often what we know is the power of social media and mobile gaming. This relatively new and burgeoning industry has become a gold mine for investors and entrepreneurs due to microtransactions and ad revenue. This force driven by monetary transactions ranging from .99 cents to hundreds of dollars has a business model which focuses on what are referred to as “whales” in the industry. These are individuals who instead of making periodic small in-game purchases spend thousands of dollars on one game. Many innovative and driven individuals have made significant profits following this trend. Yet not all entrepreneurs want to put in the effort to make their business successful and instead take advantage of hopeful investors.
One such entrepreneur, Robert Alexander founder of Kizzang, LLC, a digital and media entertainment company has been charged by the SEC for defrauding his investors. Mr. Alexander promised his investors the world misrepresenting everything from his own investment in the company to his background. Mr. Alexander represented to his potential investors that he personally had invested millions of dollars in Kizzang and that he was a key player in the development of several prominent games. The charges filed against Mr. Alexander focus mainly on his alleged misrepresentations of his use of investor funds. Mr. Alexander allegedly guaranteed his more than 50 investors a return of at least a break even and up to ten times their investment in the next three years and made gross misrepresentations of where their money was going. Mr. Alexander repeatedly misrepresented the amount of funds raised for the business as well as lying to investors about how their money was being used in the business ranging from “Market Launch and advertising” for $2,075, 000 to $1,4000,000 for “Technology and Development.” In truth, the SEC claims that Mr. Alexander was using the funds for his personal expenses for everything from mortgage payments and culinary school tuition to gambling outings.
The SEC’s complaint filed on February 7, 2019, brings charges for violation of the anti-fraud provisions of the Securities Act and the Securities Exchange Act. The SEC is seeking immediate and permanent injunction against Mr. Alexander and Kizzang, LLC putting a halt to his malicious and fraudulent business practices. The SEC also in seeking civil penalties to aid those injured by Mr. Alexander including return of those “ill-gotten monetary gains plus interest.” Mr. Alexander will also face criminal charges in the Southern District of New York. Consequently, it is now game over for Mr. Alexander and Kizzang, LLC.