SEC Charges Florida Penny Stock Operators With Defrauding Elderly Investors in Push to Crack Down on Repeat Offenders
Litigation Release No. 24026 / January 8, 2018
Securities and Exchange Commission v. Joseph A. Rubbo, et al., Civil Action No. 17-cv-62345 (SDFL, filed November 30, 2017)
The Securities and Exchange Commission charged two individuals with defrauding elderly investors in a penny stock scheme involving Florida entertainment companies and their Spongebuddy product. The charges are part of the Miami Regional Office’s Recidivist Initiative which has thus far resulted in enforcement actions against 23 individuals, nine of whom also have been charged by criminal authorities.
The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, charges Joseph A. Rubbo and Angela Beckcom Rubbo Monaco, both of Coral Springs, Florida, with defrauding investors through offerings by their companies VIP TV LLC, VIP Television Inc., and The Spongebuddy LLC. Rubbo and Monaco are repeat offenders whose prior securities schemes resulted in criminal convictions against Rubbo and SEC injunctions against both Rubbo and Monaco.
According to the SEC’s complaint, Rubbo and Monaco raised at least $5.4 million from 11 primarily elderly investors to fund the growth of their entertainment business and develop the Spongebuddy, a sponge-like glove purportedly to be sold in stores.
The SEC’s complaint alleges that Rubbo and Monaco controlled the companies and hired Steven Dykes to cold call investors and pitch investments in VIP. For example, Dykes allegedly told an investor that the Starz cable channel and Pandora Radio were both interested in buying VIP and would roll-up VIP into these entities. The investor also was allegedly told that the Spongebuddy would be featured on the television show Shark Tank and marketed on QVC. Contrary to alleged representations that investor money would be used to benefit the VIP companies, Rubbo and Monaco misappropriated more than $2.6 million in investor funds to pay themselves and their relatives as well as undisclosed sales commissions to Dykes. The complaint also alleges they paid for personal expenses such as the down payment on a luxury vehicle, credit card bills, unrelated construction work and to finance a business operation for a Monaco family member.
During the time of the alleged scheme, neither Rubbo, Monaco, nor Dykes were registered with the Commission. The SEC encourages all investors to check the background of people selling investments by using the search tool on Investor.gov to quickly identify whether the sellers are registered professionals.
The SEC’s complaint charges Rubbo and Monaco with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (Securities Act) (as to Rubbo, Section 17(a)(1) and (3) only), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder (as to Rubbo, Rule 10b-5(a) and (c) only.) The SEC also charged Dykes with violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act and charged Rubbo and Monaco aiding and abetting Dykes’ violations. The SEC is seeking the return of the defendants’ allegedly ill-gotten gains with interest, monetary penalties, a permanent injunction, and other relief.
The SEC’s investigation, which is continuing, is being conducted by Linda S. Schmidt and Lina M. Fernandez in the Miami Regional Office. The case is being supervised by Jason R. Berkowitz and the SEC’s litigation is being led by Christine Nestor. The SEC appreciates the assistance of Florida’s Office of Financial Regulation.