Broken IPO promises

In one case, the SEC alleges that Chidwhite Enterprises, Inc, whose sole shareholder and CEO was Jerry L Chidester, 26, used “spam” e-mail and a website to secure capital of US$96000 from investors in the US and abroad for an online eyewear company. The defendants claimed that payment of a US$10 “administrative fee” would secure investors stock credits that could be redeemed against ordinary equity shares after a supposedly imminent initial public offering (IPO). The SEC’s complaint contends numerous misrepresentations and omissions on the part of the defendants, including that the offering had SEC approval, that Chidwhite would launch an IPO when the offering was completed and that the stock would be priced at between US$20 and US$50 at the time of the IPO. In reality, the SEC never granted approval and Chidwhite did not take steps to float the company. In addition, the business had no offices or inventory and failed to sell either products or services. The SEC alleges that Chidester misappropriated the administrative fees and spent them on personal share trading, restaurant meals, gambling and at adult entertainment clubs. (SEC v Chidwhite Enterprises, Inc and Jerry L Chidester.)