(Hedgeco.Net) The Securities and Exchange Commission today charged Students of Strength, Inc., which operated in Massachusetts and Texas, and its CEO, Rahsaan King, with raising money by making false and misleading statements to investors. King and his company have offered to settle the case by, among other things, agreeing to pay disgorgement and a penalty together totaling over $200,000.
The SEC’s complaint alleges that during 2017 and 2018, Students of Strength raised over $1 million from more than twenty investors through the sale of common stock and convertible notes. As alleged, King described the company to potential investors as a thriving online tutoring business that connected college student tutors with student customers, and represented that the company needed outside investment to grow and meet the high demand for its services. In fact, the complaint alleges, the company had very few customers and only nominal cash flow. According to the complaint, King made misrepresentations to potential investors about the company’s historical revenue and current cash flow; the company’s assets and liabilities; the company’s operations; and the number of tutors hired and students tutored.
The complaint, filed in federal court in Massachusetts, charges King and Students of Strength with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, King and Students of Strength consented to be permanently enjoined from violations of these laws. Students of Strength also agreed to an injunction requiring the company for a period of ten years to provide all prospective investors with a copy of the complaint and final judgment in the action. King agreed to a similar conduct-based injunction with respect to prospective investors in any entity that King directly or indirectly owns or controls, or in any entity by which King is employed or consults with in a capacity that involves offering or selling securities. King also agreed to pay a $96,384 penalty and $115,067 in disgorgement plus $11,066 in prejudgment interest. The proposed settlements are subject to court approval.
