SEC Wins $7M Lawsuit Against Janus Spectrum for 800 MHz Licenses
Tuesday, October 03, 2017 | Comments

The U.S. District Court of Arizona found in favor of the Securities and Exchange Commission (SEC) in a case involving FCC licenses in the 800 MHz expansion and guard bands. The court found Janus Spectrum, David Alcorn Professional Corp. (DAPC), David Alcorn and Kent Maerki violated SEC laws and will be ordered to pay more than $7 million.

In 2015, the SEC filed a complaint in federal district court charging that Alcorn and Maerki orchestrated offering fraud through Janus Spectrum, an Arizona-based company they founded and managed. Janus Spectrum claimed to be a service provider that prepares cellular spectrum license applications on behalf of third parties. The complaint alleged 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 argued that Alcorn, Maerki and the other defendants planned and operated an investment scheme to apply for, obtain and monetize FCC spectrum licenses that they knew or should have known had little value.

The court said undisputed facts establish that several fundraising entities offered and sold unregistered securities to investors, and Janus Spectrum, Alcorn and Maerki were both necessary participants and substantial factors in the fundraising entities’ offerings and sales transactions of securities in violation of the Securities Act.

The court said Janus Spectrum, Alcorn, and Maerki violated the anti-fraud provisions of the Securities Act and the Exchange Act and engaged in reckless conduct.

The court said the SEC established all of the elements showing that Janus Spectrum, Alcorn and Maerki violated, in connection with the offer or sale of a security, were engaged in a scheme to defraud investors with knowledge of wrongdoing and did so through means of interstate commerce. The court also said the SEC showed that Janus Spectrum, Alcorn and Maerki acted at least negligently in marketing the investment scheme through the fundraising entities to prospective investors. In connection with the offer or sale of a security and through interstate commerce, Janus Spectrum, Alcorn and Maerki obtained money or property by means of materially false statements and omissions.

It is undisputed that neither Janus Spectrum, Alcorn nor Maerki were registered as a broker-dealer with the SEC. “The undisputed evidence demonstrates that Janus Spectrum, Alcorn and Maerki acted as a broker because they actively solicited investors to purchase interests in spectrum licenses,” the court said.

The court also found that DAPC is liable, as a control person, for certain Janus Spectrum violations. Janus Spectrum, DAPC, Alcorn and Maerki will be ordered to pay nearly $6.2 million in in disgorgement and be jointly and individually liable with each other for the disgorgement amount.

The entities will also be ordered to pay prejudgment interest from May 1, 2012, to Jan, 13, 2017, the date of filing of the SEC’s motion for summary judgment. Prejudgment interest on $6.2 million for the period is $959,436. Thus, the total amount of disgorgement and prejudgment interest owed by Janus Spectrum, DAPC, Alcorn and Maerki, on a joint and several liability basis, is $7.13 million.

The order also said a permanent injunction against the defendants will be ordered. The exact activities covered by that order were not specified in the court’s decision.

In addition, the court will assess civil penalties against Alcorn and Maerki in an amount to be determined at a Dec. 5 hearing.

The SEC has until Oct. 27 to file a motion for disgorgement, prejudgment interest and civil penalties against judgment defendants Daryl Bank; Dominion Private Client Group; Janus Spectrum Group; Spectrum Management; Spectrum 100; Spectrum 100 Management; Prime Spectrum; and Prime Spectrum Management.

According to the SEC's motion for summary judgment, Bank and the listed entities  participated in fundraising efforts for Janus Spectrum's operations. Bank received commission or finder's fees of $567,140 from Janus Spectrum, according to the motion.

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