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INOFIN FRAUD

THE UNITED STATES SECURITIES AND EXCHANGE COMMISION FILES FEDERAL LAWSUIT AGAINST INOFIN, INC. ALLEGING FRAUD ON ITS INVESTORS

On April 14, 2011, the United States Securities and Exchange Commission ("SEC") filed a 58 page federal lawsuit against Inofin, Inc and others alleging violations of federal securities laws including fraud on its investors.

 

The SEC's Allegations

The SEC alleges that:

 

1. Inofin, Inc., a Massachusetts corporation, and the individual defendants have illegally raised at least $110 million from hundreds of investors residing in twenty-five states and the District of Columbia through the sale of unregistered securities by, among other things, making material misrepresentations about Inofin's financial performance, its business activities, and the use of investor funds.

 

2. Since 1994, Inofin has held itself out to the investing public as a motor vehicle sales finance company specializing in the purchase of subprime auto loans. Although the company has never submitted a registration statement to the Commission, Inofin raised funds from investors through the offer and sale of debt securities.

 

3. From at least 2004 through 2010, Inofin and its principal officers, President Michael Cuomo ("Cuomo"), Chief Executive Officer Kevin Mann ("Mann"), and Chief Operating Officer Melissa George ("George") misrepresented to investors that the company uses investor money for the sole purpose of funding subprime auto loan lending activity. As part of the pitch, Inofin and its principals told investors that they could expect to receive returns from nine to fifteen percent on their investment because Inofin loaned investor money to its subprime borrowers at an average rate of twenty percent.

 

4. Since at least 2005, however, Inofin and its principal officers have known that these representations omitted certain material facts that misled investors about the substance of Inofin's true lending activities. Beginning in 2005 and continuing through 2010, Inofin and its principals have failed to inform investors that Inofin lent approximately a third of its capital to businesses established and controlled by and for the benefit of Cuomo and Mann for the purpose of starting four used car dealerships and engaging in multiple commercial and residential real estate property developments. Inofin and its principals also failed to disclose that the "non auto" loans were made at rates that were substantially lower than the subprime auto loan rates advertised to investors.

 

5. Since at least 2006, Inofin and its principals have also materially misrepresented Inofin's financial performance. As early as 2006 and continuing through 2011, Inofin has had a negative net worth and a progressively deteriorating financial condition. This deterioration has been caused not only by the failure of Inofin's undisclosed business activities, but also by its management's conduct in selling off of Inofin's core auto loan portfolio at a discount in order to solve ever increasing cash shortages. Nevertheless, from 2006 through 2010, Inofin and its principal officers continued to offer and sell Inofin securities, knowingly or recklessly misrepresenting to investors that Inofin was a profitable business and a sound investment. In addition, as explained in further detail in the complaint, beginning in 2006 and continuing through April 2010, Inofin's principals engaged in a scheme to defraud investors by maintaining Inofin's license to do business as a motor vehicle sales finance company by preparing and submitting materially false financial information to its licensing authority, the Massachusetts Division of Banks.

 

7. Finally, Inofin's capital raising activities have been supported by, among other things, commission-based sales agents that included David Affeldt and Thomas K. ("Kevin") Keough. They successfully promoted the offering and sale of Inofin's unregistered securities. Based on these sales, they collectively (together with Kevin Keough's wife Nancy Keough) received several hundred thousand dollars in commissions.

 

8. In January 2011, Inofin sent a written communication to investors disclosing for the first time any hint of financial trouble. The company sent investors a letter and an "audited" balance sheet for the year ended December 31, 2009. The balance sheet disclosed that, by the end of 2009 (nearly 13 months earlier), the company had incurred at least $35 million in accumulated deficits from its inception, the company's liabilities exceeded its assets by approximately $29 million, and the company was therefore insolvent on a balance sheet basis. This 2009 balance sheet further disclosed that at least $19 million worth of these losses were attributable to loans that Inofin made to the auto dealerships and real estate entities. The letter explained that these losses had been mounting since at least 2004 when the company first engaged in "non auto loans" that did not earn the high rates of return Inofin received on the subprime auto loans.

 

9. By knowingly and recklessly engaging in the fraudulent conduct described in the complaint, Defendants Inofin, Cuomo, Mann, and George violated the antifraud provisions of the federal securities laws, specifically, Sections 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 10. By engaging in the conduct described herein, Inofin, Cuomo, Mann, George, Kevin Keough, and David Affeldt violated the registration provisions of the federal securities laws, specifically, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e(a) & (c)]. 11. By engaging in the conduct herein, Kevin Keough, and David Affeldt acted as unregistered broker-dealers in violation of the registration provisions of the federal securities laws, specifically, Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].

 

The allegations above are the allegations made by the SEC. None of the allegations above have been proven to be true and they may in fact be proven to be false.. At this point, we have not made a determination as to whether individuals can or cannot make a case for fraud against Inofin, Inc. or any of the individuals named by the SEC. We are, however, interested in investigating the alleged facts further.

 

HAVE US INVESTIGATE YOUR POTENTIAL CASE AGAINST INOFIN, INC.

If you believe that you have been defrauded by Inofin, Inc, you may be eligible for financial compensation . If you think that you have a claim, click here to fill out our online consultation form. Our attorneys have successfully tried many cases to verdict.

 

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