From approximately July 25, 2007 through at least November 2009, United American Ventures, LLC (“UAV”) raised at least $10 million from approximately 100 investors in multiple states through the unregistered and fraudulent sale of so-called “convertible bonds.” These bonds purported to pay an annualized interest rate of 25 percent and provide a 10 percent up-front “interest bonus,” such that someone who invested $100,000 in a UAV bond purportedly would have received interest on a principal amount of $110,000. UAV represented that investors could either collect monthly interest payments on their bond or compound the interest, which purportedly would result in a higher payoff when the bond matured after three or four years.
UAV sold its bonds through a network of “referrers” or “finders,” who were paid substantial fees for each new investment they have brought to UAV. Between approximately April 8, 2009 and November 2009, UAV’s main source of new investors was Integra Investment Group, LLC (“Integra”) and Integra’s president, Anthony (“Tony”) J. Oliva. Through its aggressive marketing efforts, which included a website, brochures, and seminars, Integra directed to UAV approximately 50 investors, who invested approximately $3.5 million in UAV bonds. In return for those referrals, UAV paid Integra at least $340,000 in fees.
UAV purported to be a venture capital fund that invested in companies with “late-stage” pharmaceutical or medical device technologies and took those companies public or sold them to other, larger companies in private transactions. Its offering materials repeatedly claimed, among other misrepresentations, that UAV was able to pay 25 percent interest on its bonds because it could reliably earn far greater returns (in excess of 300 percent) on the ventures in which it invested. Integra and Oliva similarly had characterized UAV’s bonds as “guaranteed” and assured investors that UAV, at all times, maintained sufficient assets to cover its obligations to bondholders.
In reality, UAV had never earned a return from any investment in any venture at any time. Instead, it had paid monthly interest payments to existing bondholders with money contributed by new investors. Further, of the approximately $10 million it had collected from investors, UAV invested only a small fraction in the medical ventures that were supposed to generate the promised returns. Virtually all the rest was paid to referrers like Integra, returned to investors as monthly interest payments, or used to cover UAV’s operating expenses. As a result, UAV was close to collapse at various times and, as of mid-December 2009, had only enough cash on hand to cover approximately one month of expenses.