“Success Fraud” Pyramid Scheme Raises $4.7M
A Texas man agreed to settle charges with the U.S. Securities & Exchange Commission (SEC) after he was accused of raising more than $4.7 million by targeting fellow members of a pyramid scheme “success club.”
According to the SEC, Darrell Hardaway and his company, Hardaway Net-Works Inc. (HNW) raised money from investors by claiming that his company was “growing robustly” and would soon file for an IPO.
In the Global Information Network Ponzi Scheme, Hardaway targeted fellow members of the Global Information Network, a “success club” claiming to help its members achieve business success.
Global Information Network Ponzi Scheme
The Federal Trade Commission (FTC) has labeled the organization a pyramid, or Ponzi scheme, whereby new investor money was used to pay “investment returns” to earlier investors. Hardaway was a high-ranking member of the Global Information Network, whose founder was ordered to pay a $37.6 million contempt judgment to the FTC in 2010 for making misleading statements in infomercials and was also found guilty of criminal contempt for misrepresenting the content of a book he once wrote.
Global Information Network Members Invest in Ponzi Scheme
Investors fell for Hardaway’s promises of massive returns and a forthcoming IPO, which never materialized.
Hardaway began raising funds through a private offering of HNW shares in 2010, telling investors that the money would provide internet and technology support to Houston- area hotels and expected to generate a $2.3 million return in the first year. The company generated no income in 2010 and only $2,250 in 2011, against $1.4 million in expenses. Hardaway represented that the company was poised to expand its customer base to 300 hotels, while only having two clients and no concrete plans to expand operations.
Instead of focusing on the business, Hardaway zeroed in on the prospect of an IPO to convince would-be shareholders that their profits would be significant. HNW did not come close to having the funds to go public, and only earned approximately $25,000 from 2010 to 2016 while incurring nearly $5 million in expenses. Among other things, Hardaway used the money for travel, private investment, and personal items.
Involved in the Global Information Network Ponzi Scheme?
If you invested with Darrell Hardaway or Hardaway Net- Works Inc., or invested in a similar scam, you may have certain legal rights that require your immediate attention.
Call a Los Angeles Securities Fraud Attorney Today
Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.