New York (Hedgeco.Net) – The owners of Gigapix Studios told investors they had a sure thing: They were going to make an animated version of the Wizard of Oz called OZ3D, and those who got in on the ground floor—and the company’s imminent public offering—could make a killing.
Unfortunately, the film was a bigger fairy tale than investors bargained for, and approximately 730 people lost millions of dollars. For some, the investment represented their life savings.
Between the film and the impending public offering, the two principal fraudsters behind Los Angeles-based Gigapix raised some $21 million over a seven-year period beginning in 2006. Of the $8 million raised for the movie, only 5 percent of that amount went toward actually producing a film. The rest was used to pay big salaries, commissions, overhead for a fancy office, and other expenses.
Christopher Blauvelt, 59, and David Pritchard, 67, were convicted in 2014 on a series of federal charges including mail fraud, wire fraud, and offering unregistered securities for sale. Last month, Blauvelt was sentenced to eight years in prison, and Pritchard received a five-year term.
Blauvelt founded Gigapix in 2002 and brought Pritchard on as a partner four years later. The two hired telemarketers to solicit potential investors, who were told that Gigapix was a blockbuster animation company waiting to happen—similar to Pixar Animation Studios—and that Gigapix was developing projects expected to generate huge profits when the company went public.
The telemarketers—known as “fronters”—used marketing lists to cold call potential investors and worked from scripts touting the supposed merits of Gigapix. When victims expressed an interest in investing, they were turned over to “closers” who collected their money. Two of the company’s closers were also convicted in the fraud.
Some of the victims were hedge fund managers and “savvy investors,” Potocek noted, and perhaps could afford to lose what they risked. But many victims—referred by friends or other investors and who lived far away from Hollywood—were susceptible to the sales pitch and the lure of being part of the film business.
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