Hagens Berman represents the successful whistleblower who exposed what the Securities and Exchange Commission classified as a “fraudulent hi-tech scam” perpetrated by Moddha Interactive. The Hawaiian company bilked investors out of a significant amount of funds on the strength of its “Quantum Transducer” technology, which the SEC called “a sham.” Moddha’s assets were seized shortly after the SEC filed its lawsuit, which ultimately resulted in a substantial monetary penalty for the defendants.
HOW MODDHA DEFRAUDED INVESTORS
According to the SEC’s complaint, Moddha sought to woo investors by touting its "exclusive proprietary portfolio of patents based on the Quantum Transducer (QT)," a technology that would allow consumers to operate tablet devices "with the wave of your hand, as if you were Tony Stark in ‘Iron Man,’" and produce "a more elegant, thinner, healthier and more energy-efficient device than iPhone and Android." Yet while Moddha did hold a handful of patents at one time, they had all expired by the time the company sought outside investment—which it did with the illicit assistance of co-defendant Spar Street, who solicited funds without registering as a broker with the SEC.
Furthermore, during a demonstration, Moddha’s Chief Executive Officer (and co-defendant), Marianne Veronika Sandor, impressed potential investors by showing off the company’s purported Q-Tablet, which generated 3D imagery. But as Sandor would later admit, another company developed and owned the Q-Tablet. In fact, as the SEC’s complaint notes, all of the devices Sandor and her husband (and co-defendant), Moddha Chief Technology Officer Edward Michael Porrazzo, claimed to be theirs “were either fake, or were designed and developed by other companies.”
Eventually, investors became impatient with Moddha’s married officers and wondered when they would see a return on their money. According to the complaint, when pressed about a promised $150 million cash infusion that would supposedly make investors whole, Sandor “claimed first that the $150 million investor was sick, and then that he was delayed by a shooting at a foreign embassy, and finally that the $150 million payment was held up because the investor's flight had been grounded by the eruption of an Icelandic volcano."
Later, when a couple who’d invested in Moddha asked Sandor why they were unable to redeem their shares, she replied with an email in which she claimed that share redemption had been delayed by the fact that the company’s entire executive team was “down and offline for the past five weeks with this horrible, high-fever bronchial flu.”
She added, “Although it was out of our control that our whole team came down with this violent influenza at such a critical moment, we wish to apologize to each of you for any hardship this delay and/or our being out of touch has caused to you.”
NO PATENTS, SEIZED ASSETS & AN SEC FINE
Since Moddha held no active patents and appeared to lack any actual products of its own, it’s fair to ask just how Sandor, Porrazzo and Street spent investors’ money. To this end, as the SEC’s complaint states, “Moddha’s unregistered securities offering was simply a means to fund Sandor’s and Porrazzo’s lifestyle.”
One chart included in the complaint shows that out of $827,025 collected from investors between January 2017 and April 2018, the defendants spent $420,251 on trips to Liquor Barn and other retail transactions that had “no evident business purpose,” as well as commissions doled out to Street for his unauthorized brokerage work. Sandor and Porazzo also used $15,884 in additional investor funds to treat themselves to a seven-day stay at a luxury hotel in Santa Monica, California, where they enjoyed spa treatments and a $425 bottle of wine in their $2,400-a-night room.
In July 2018, shortly after the SEC responded to Hagens Berman’s whistleblower claim by filing suit against Moddha, the agency seized the company’s assets. And in July 2020, Sandor and Porazzo were ordered to pay a substantial fine to the SEC for defrauding investors.
ABOUT THE SEC WHISTLEBLOWER PROGRAM
Hagens Berman is one of a handful of the leading law firms representing successful whistleblowers under the SEC whistleblower program. We were SEC representing whistleblowers even before the first day that the Securities and Exchange Commission’s Dodd-Frank Whistleblower Program launched in the summer of 2011. We beat the odds for our clients, having recovered maximum awards in several record-setting cases. Our current SEC whistleblower cases run the gamut of securities fraud: misrepresentations and omissions in financial filings; accounting fraud; insider trading; market manipulation; market structure and trading violations; pricing fraud; offering fraud; foreign bribery (FCPA); investment fraud; other various other kinds of securities fraud. Our whistleblower legal team represents dozens of SEC whistleblowers around the world in cases currently under investigation by SEC Enforcement Division offices across the country.
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Whistleblower cases are kept under strictly enforced confidentiality by the government or the courts during the period of investigation, and for the SEC/CFTC/IRS programs, in perpetuity. Likewise, whistleblower attorneys at Hagens Berman will handle its investigation and any eventual lawsuit or agency complaint with the highest confidentiality to protect your anonymity. We work to protect your anonymity, confidentiality, and job security during the entirety of our representation. Whistleblower laws protect employees from retaliation and Hagens Berman helps whistleblowers address retaliation and potential retaliation. To understand your rights and the legal protections provided by several whistleblower programs, contact us for a confidential consult.
TOP WHISTLEBLOWER LAW FIRM
Hagens Berman’s team of expert whistleblower attorneys, led by managing partner, Steve Berman and head of whistleblower practice, Shayne Stevenson, has the track record, reputation, and knowledge to advocate for whistleblower clients in ways others do not. Our whistleblower practice is among a handful of the most successful and respected in the U.S. Unlike smaller, less experienced whistleblower law firms, Hagens Berman also has more than 80 attorneys in cities worldwide litigating complex corporate fraud every day, giving our clients the resources and expertise necessary to take on a broad range of whistleblower cases.
