throbber
Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 1 of 29 Page ID #:1
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`AMY JANE LONGO (Cal. Bar No. 198304)
`Email: longoa@sec.gov
`JANET RICH WEISSMAN (Cal. Bar No. 137023)
`Email: weissmanj@sec.gov
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`Attorneys for Plaintiff
`Securities and Exchange Commission
`Michele Wein Layne, Regional Director
`Alka N. Patel, Associate Regional Director
`444 S. Flower Street, Suite 900
`Los Angeles, California 90071
`Telephone: (323) 965-3998
`Facsimile: (213) 443-1904
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`UNITED STATES DISTRICT COURT
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`CENTRAL DISTRICT OF CALIFORNIA
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`SECURITIES AND EXCHANGE
`COMMISSION,
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`Case No.
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`2:21-cv-7339
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`Plaintiff,
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`COMPLAINT
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`vs.
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`SHE BEVERAGE COMPANY, INC.,
`LUPE L. ROSE, SONJA F. SHELBY
`AND KATHERINE E. DIRDEN,
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`Defendants.
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`Plaintiff Securities and Exchange Commission (“SEC”) alleges:
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`JURISDICTION AND VENUE
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`1.
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`The Court has jurisdiction over this action pursuant to Sections 20(b),
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`20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
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`77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 2 of 29 Page ID #:2
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`Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
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`78u(d)(3)(A), 78u(e) & 78aa(a).
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`2.
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`Defendants have, directly or indirectly, made use of the means or
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`instrumentalities of interstate commerce, of the mails, or of the facilities of a national
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`securities exchange in connection with the transactions, acts, practices and courses of
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`business alleged in this complaint.
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`3.
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`Venue is proper in this district pursuant to Section 22(a) of the Securities
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`Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a),
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`because certain of the transactions, acts, practices and courses of conduct constituting
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`violations of the federal securities laws occurred within this district. In addition,
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`venue is proper in this district because Defendants Lupe Rose, Sonja Shelby and
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`Katherine Dirden reside in this district, and Defendant SHE Beverage Company, Inc.
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`has its principal place of business in this district.
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`4.
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`This civil enforcement action involves an offering fraud perpetrated by
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`SUMMARY
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`Defendants SHE Beverage Company, Inc. (“SHE Beverage”) and its principals Lupe
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`L. Rose, Sonja F. Shelby and Katherine E. Dirden. Located in Lancaster, California,
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`SHE Beverage produces beverages targeting female customers. Between 2017 and
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`2019, SHE Beverage raised over $15 million from unregistered stock sales to more
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`than 2,000 investors from across the country. SHE Beverage and its principals
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`falsely represented to investors that they would use 30% of the offering proceeds to
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`purchase beverage inventory. In fact, they spent only approximately 2% of the
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`monies they raised on beverages. In the meantime, they misappropriated roughly half
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`the offering proceeds—at least $7.5 million—in cash withdrawals and to pay personal
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`expenses such as cars and trucks, rent, luxury retail goods, and trips to casinos.
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`5.
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`Defendants carried out their aggressive fund-raising by falsely
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`promoting the company as being successful in a variety of ways. Defendants
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`overstated and mischaracterized the revenues earned by the company since its
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 3 of 29 Page ID #:3
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`inception. Defendants claimed the company had launched its own brewery, whereas
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`it had not even completed its construction. They falsely touted the company’s bottled
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`water as “proprietary” and “FDA approved,” when it was neither. Defendants
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`claimed the company had received acquisition offers in the hundreds of millions of
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`dollars; in reality, it had no such offers. The principals claimed to have millions of
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`their own money invested in the company, whereas their investments were much
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`more modest. They frequently represented that the company’s planned initial public
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`offering (“IPO”) was imminent, when they had not yet even filed a registration
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`statement with the SEC. They touted the acquisition of a cannabis-related company,
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`concealing that it was obtained from affiliates (sisters of one of the Defendants) with
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`no independent valuation, and had no operations or sales.
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`6.
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`SHE Beverage’s fraudulent stock offering was not registered with the
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`SEC; thus investors lacked important information about the company’s financial
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`condition. Defendants raised money from thousands of investors in numerous states,
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`including from unaccredited investors. The company engaged in general solicitation
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`over the internet and solicited investors to deposit by cash, checks, credit cards and
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`electronic payment processor, at times offering referral, two-for-one, and other
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`bonuses, and frequently hyping investors’ last chance to invest pre-IPO. The only
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`Form S-1 registration statement ever filed by the Defendants, in January 2020, never
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`went effective and was declared abandoned in 2021.
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`7.
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`By their conduct, Defendants violated Sections 5 and 17(a) of the
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`Securities Act, 15 U.S.C. §§ 77(e)(a), 77(e)(c), 77q(a), and Section 10(b) of the
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`Exchange Act, 15 U.S.C. § 78j(b) and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-
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`5(a)-(c).
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`8.
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`The SEC seeks findings that the Defendants committed these violations;
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`permanent injunctions, disgorgement with prejudgment interest, civil penalties, and
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`against Defendants Rose, Shelby, and Dirden, officer and director bars.
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`COMPLAINT
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`THE DEFENDANTS
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`9.
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`SHE Beverage Company, Inc. (“SHE Beverage”), is a California
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`corporation, which was incorporated in or about 2015, with its principal place of
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`business in Lancaster, California. SHE Beverage promotes itself primarily as a
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`beverage company targeted at female consumers, along with several additional lines
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`of business. SHE Beverage has never been registered with the SEC in any capacity,
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`has never had a class of securities registered with the SEC, and its securities have
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`never been publicly traded. SHE Beverage is controlled by Defendants Rose, Shelby
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`and Dirden.
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`10. Lupe L. Rose (“Rose”), 52, lives in Palmdale, California and holds
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`herself out as SHE Beverage’s co-founder, owner, chief executive officer (“CEO”),
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`president and chair of the board of directors. Rose has never been registered with the
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`SEC in any capacity and has never held any securities licenses.
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`11. Sonja F. Shelby (“Shelby”), 58, lives in Palmdale, California and holds
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`herself out as SHE Beverage’s co-founder, owner, vice president, treasurer, vice
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`chair, chief financial officer (“CFO”), principal financial officer, and member of the
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`board of directors. Shelby has never been registered with the SEC in any capacity
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`and has never held any securities licenses.
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`12. Katherine E. Dirden (“Dirden”), 46, lives in Lancaster, California and
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`holds herself out as SHE Beverage’s chief operations officer (“COO”), investor
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`relations director, and a member of the board of directors. Dirden has never been
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`registered with the Commission in any capacity and has never held any securities
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`licenses.
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`THE ALLEGATIONS
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`A.
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`SHE Beverage and its Principals
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`13. Rose and Shelby co-founded and began working on the concept for SHE
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`Beverage in or around 2009; Rose subsequently incorporated SHE Beverage in or
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`about 2015.
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`COMPLAINT
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`14.
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`In or around February 2016, SHE Beverage hired Dirden as its COO.
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`15. SHE Beverage was promoted primarily as a women-owned beverage
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`manufacturer, selling beer and other brewed drinks, wine, and bottled water, aimed at
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`female consumers.
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`16. SHE Beverage’s offering documents identify Rose as the co-founder,
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`owner, chief executive officer, president and chair of the board of directors.
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`17. SHE Beverage’s offering documents identify Shelby as the co-founder,
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`owner, vice president, treasurer, vice chair, chief financial officer, principal financial
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`officer, and member of the board of directors.
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`18. SHE Beverage’s offering documents identify Dirden as the chief
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`operations officer, investor relations director, and a member of the board of directors.
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`19. As its most senior executive, Rose had ultimate decision-making
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`authority for SHE Beverage. During the relevant period, Rose exercised day-to-day
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`control over SHE Beverage, including meeting with beverage manufacturers,
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`purchasing inventory, and marketing and delivering product. Along with Shelby and
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`Dirden, Rose was a member of SHE Beverage’s three-person executive team.
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`20. Although SHE Beverage identified her as the CFO and treasurer,
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`Shelby’s primary responsibilities during the relevant period were for human resources
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`and other administrative duties. Along with Rose and Dirden, Shelby was a member
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`of SHE Beverage’s three-person executive team.
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`21. Dirden functioned as SHE Beverage’s chief operating officer, including
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`selling product and taking care of internal reporting systems. During the relevant
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`period, Dirden had primary responsibility for investor relations, including answering
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`questions of prospective and actual investors about SHE Beverage’s offering. Along
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`with Rose and Shelby, Dirden was a member of SHE Beverage’s three-person
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`executive team.
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`22. Rose, Shelby and Dirden are all signatories on the company’s bank
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`accounts.
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 6 of 29 Page ID #:6
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`23. SHE Beverage’s website addresses during the relevant period included:
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` http://www.shebeverages.com
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`and
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` http://sheinvestmentguide.com.
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`24. During the relevant period, Defendants utilized the following email
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`addresses:
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`Rose: lupe@shebeverages.com, luperosetheceo@gmail.com,
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`Shelby: sonjashelby@vahoo.com, sonja@shebeverages.com,
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`sshelby@sheverages.com,
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`and
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`Dirden: kat@shebeverages.com.
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`B. Defendants’ Offer and Sale of Securities
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`25. Between 2017 and 2019, SHE Beverage raised over $15 million from
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`more than 2,000 investors nationwide.
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`26. SHE Beverage issued securities in the form of shares of SHE Beverage.
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`Investors purchased shares from SHE Beverage through a variety of
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`means, including cashier’s checks, personal checks, wires, credit cards, transactions
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`through PayPal, cash or by deposits directly into SHE Beverage’s bank account.
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`28. SHE Beverage offered and sold securities using offering memoranda,
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`investment guides, its websites, emails, and verbal communications.
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`29. Between approximately October 2017 and mid-June 2018, SHE
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`Beverage offered and sold its shares through an offering memorandum (the “2017
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`OM”).
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`30. SHE Beverage utilized an outside consultant to prepare the 2017 OM.
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`31. The 2017 OM offered shares of SHE Beverage’s common stock at $2.50
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`per share.
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`32. The 2017 OM included a cover letter and subscription agreement. The
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`subscription agreement requested prospective investors to provide information as to
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 7 of 29 Page ID #:7
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`their status as an accredited investor.
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`SHE Beverage provided the 2017 OM to prospective investors during in-
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`person meetings.
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`34. Beginning in or about mid-June 2018, SHE Beverage offered and sold
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`stock to investors through a private placement memorandum dated June 20, 2018 (the
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`“2018 PPM”).
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`35. Rose, Shelby and Dirden worked with an outside consultant to prepare
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`the 2018 PPM.
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`The 2018 PPM offered up to $25 million of SHE Beverage’s common
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`stock at $2.50 per share.
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`The 2018 PPM stated that the shares were exempt from registration
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`under Securities Act Sections 3(b), 4(2), and Rule 506 thereunder, and that
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`prospective investors were required to meet “suitability standards” set forth in the
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`2018 PPM.
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`38.
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`SHE Beverage provided the 2018 PPM to prospective investors during
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`in-person meetings or by email.
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`39. Rose, Shelby and Dirden reviewed the 2018 PPM before it was provided
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`to investors, including the disclosures on the use of proceeds.
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`SHE Beverage also solicited investors using a 2018 SHE Beverage
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`Investment Guide and Corporate Update (the “2018 Investment Guide”).
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`41. Rose created the 2018 Investment Guide and it was distributed at
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`investor meetings along with the 2018 PPM.
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`42. During SHE Beverage’s offering, the 2018 PPM and the 2018
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`Investment Guide were available on SHE Beverage’s websites.
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`The 2018 Investment Guide included a “New Member Welcome Letter”
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`signed by Rose, Shelby and Dirden.
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`SHE Beverage also solicited investors using a 2019 SHE Brand
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`Beverage Investment Guide (the “2019 Investment Guide”).
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`COMPLAINT
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`45. The 2019 Investment Guide was available on SHE Beverage’s website
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`from at least May 2019 to December 2019.
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`46. Rose assisted with the preparation of the 2019 Investment Guide, and
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`Rose and Dirden knew it was accessible on the company’s website.
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`47. SHE Beverage publicly offered its securities to investors through its
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`websites through at least December 2019.
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`48. SHE Beverage’s website included a section titled “Why You Should
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`Invest In Our Beverage Company” with a link to two letters from Rose, Shelby and
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`Dirden.
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`49. The SHE Investment Guide website promoted that the company was
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`accepting investments and provided a link to the 2018 PPM.
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`50. Beginning in or around December 2017 and throughout the offering,
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`SHE Beverage sent email messages to existing investors approximately once a
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`month. The messages promoted additional investment in SHE Beverage and included
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`information about SHE Beverage’s securities offering.
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`51. The investor email messages were formatted as letters to investors with
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`signatures variously from “the SHE Beverage Team” or individually from Rose or
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`Dirden.
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`52. For example, in or around the end of December 2018, in an email to
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`investors signed “SHE Beverage Executive Team,” SHE Beverage promoted a
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`“Limited Time Offer” to purchase two for one shares, noting that Rose, Shelby and
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`Dirden wanted to “provide our current investors one final amazing opportunity” to
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`invest at this price, through early January 2019.
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`53. As another example, in one 2019 email signed by Rose, SHE Beverage
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`promoted a “new minimum level of investment of $1,000 at $2.50 per share…[for]
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`new and existing investors,” and that investors could “invest an ADDITIONAL
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`investment” of at least $1,000 to obtain a chance to win a free trip.
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`In another email dated on or about April 24, 2019, signed by Rose, SHE
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`COMPLAINT
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`Beverage promoted the opportunity to “purchase at a discounted rate” and “refer
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`friends and family.”
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`In another email dated on or around November 10, 2019, signed by
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`Rose, SHE Beverage promoted the opportunity to invest $50,000 and receive
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`“advisory board shares,” stating, “can you imagine when we open larger or grow to
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`50 dollars a share?”
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`In another email dated in or around 2019, Dirden wrote that SHE
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`Beverage was “still fund-raising during this process so please continue to send us
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`anybody interested in investing or if you’d like to add to you (sic) portfolio please
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`feel free to do so,” directing prospective investors to contact her with any questions.
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`57. Rose approved the investor messages for distribution, and Dirden sent
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`them out.
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`58. Between approximately 2018 and 2019, SHE Beverage hosted three to
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`four in-person investor meetings a year, attended by SHE Beverage’s principals and
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`prospective and actual investors. Some investor meetings were streamed to out-of-
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`town investors.
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`59. With Shelby and Dirden in attendance, Rose ran the investor meetings
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`and presented at them.
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`60. At the investor meetings, SHE Beverage updated investors about the
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`business and provided its beverage products for sampling.
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`61. At the investor meetings, SHE Beverage made available its offering
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`materials, including the 2018 PPM and the 2018 Investment Guide.
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`62. During SHE Beverage’s offering, Rose and Dirden each directly
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`solicited investors.
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`63. For example, on or about August 6, 2018, Rose hosted a “meet & greet”
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`for new investors to discuss the Investment Guide.
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`64. Dirden spoke to prospective and actual investors to answer questions
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`about the offering, and was identified as the person to contact with inquiries.
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`COMPLAINT
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`65. Defendants initially solicited friends and family to invest.
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`Subsequently, they began soliciting friends and family of their investors, and engaged
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`in a general solicitation of investors for SHE Beverage’s offering.
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`66. SHE Beverage offered referral bonuses, in the form of additional shares,
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`for investors who brought in additional investors to SHE Beverage.
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`67. SHE Beverage’s offering was nationwide with more than 2,000 investors
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`who live in at least 38 states, and Guam, Puerto Rico, and Washington, D.C.
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`C. Defendants’ Fraudulent Scheme and Material Misrepresentations
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`and Omissions
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`68. SHE Beverage and its principals engaged in a scheme to defraud and
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`made material misrepresentations and omissions to prospective and actual investors
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`during the offering.
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`69. SHE Beverage was the maker of the statements in its offering
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`memoranda, investment guides, websites, press releases, and investor emails.
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`70. As SHE Beverage’s principals with day-to-day control over its
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`operations and disclosures, Rose, Shelby, and Dirden were makers of the statements
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`in SHE Beverage’s offering memoranda, investment guides, websites, press releases,
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`and investor emails.
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`71. Rose, Shelby and Dirden each directly made and signed their names on
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`statements to investors, including signing the investment guides, signing investor
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`emails as the executive team, and for Rose and Dirden, signing investor emails
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`individually. Rose was also listed as the contact on SHE Beverage’s press releases.
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`1.
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`Defendants’ misuse and misappropriation of investor proceeds
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`72. SHE Beverage and its principals misused investor proceeds by utilizing
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`only 2% of investor funds to purchase beverage inventory, contrary to the disclosures
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`in SHE Beverage’s offering materials.
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`73. Additionally, Defendants misappropriated investor funds by spending
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`millions on personal expenses and cash withdrawals, far in excess of any disclosed
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 11 of 29 Page ID #:11
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`amounts of salary or compensation to the principals.
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`74. SHE Beverage’s 2017 OM represented that the “proceeds of the offering
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`will be used for the Company’s Business Plan and management has retained
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`discretion to use the proceeds according to the Use of Proceeds of the Offering and
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`for other related uses.”
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`75. The 2017 OM did not include either a business plan or a use of proceeds
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`section, but described the business as “selling high quality beverages with a focus on
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`elite branding and brand management.”
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`76. SHE Beverage’s 2018 PPM included a use of proceeds section:
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`
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`Amount
`$12,500,000
`$7,500,000
`$5,000,000
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`$25,000,000
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`USE OF PROCEEDS
`Item
`Working Capital/Operating Expenses
`Inventory
`Sales, Marketing, Salaries
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`Total
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`
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`Percentage
`50%
`30%
`20%
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`100%
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`77. The 2018 PPM thus represented that approximately 30% of offering
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`proceeds, or approximately $4.5 million (representing 30% of the offering proceeds
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`actually raised), would be used on inventory.
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`78. During SHE Beverage’s offering, Defendants reiterated the intended
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`uses of investor proceeds in other documents provided to investors.
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`79. For example, the 2018 Investment Guide included descriptions of the
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`company and its beverage products, stating that the company would “create an elite
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`line that will not only dominate the Beverage Industry, but also change the way we
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`drink one SIP at a time.” The 2018 Investment Guide further stated that “owner
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`funding and further investor generated cash flow will enable the expansion plan.”
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`80. Similarly, the 2019 Investment Guide featured descriptions of SHE
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`Beverage’s beverage products and explained that “the goal is to raise 1 billion dollars
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`to grow the brand.”
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`81. Contrary to its representations to investors, between 2015 and 2021,
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`COMPLAINT
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 12 of 29 Page ID #:12
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`SHE Beverage spent only approximately $321,971 on beverage inventory, or
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`approximately 2% of the offering proceeds, as follows:
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`(a)
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`from 2015 to 2019, SHE Beverage paid approximately $195,375
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`to three breweries to brew craft beer and hard punch for retail sale under the SHE
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`Beverage brand name;
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`(b)
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`from 2018 to 2021, SHE Beverage paid approximately $71,550 to
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`a California distributor for its proprietary alkaline, electrolyte, purified and spring
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`bottled waters for retail sale under the SHE Beverage brand name;
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`(c)
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`in or around 2019, SHE Beverage paid approximately $26,007 to
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`a Florida distributor for its CBD bottled water to sell under the SHE Beverage brand
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`name; and
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`(d)
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`in or around 2019, SHE Beverage paid approximately $29,039 for
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`a Lancaster winery to create a private-label rosé wine.
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`82. Given the limited amounts spent on beverage inventory during the
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`offering, Defendants’ representations that they would use 30% of investor proceeds
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`on inventory were materially false and misleading.
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`83. Defendants did not disclose to investors that their purchases of inventory
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`were materially lower than the offering materials represented.
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`84. Reasonable investors would have found it important to their investment
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`decision to know that Defendants were not purchasing the amounts of inventory the
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`offering materials represented, which would necessarily impact the potential sales of
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`SHE Beverage product.
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`85. Defendants Rose, Shelby and Dirden knew, or were reckless in not
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`knowing, that SHE Beverage was misusing investor funds by not purchasing
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`beverage inventory consistent with their representations to investors.
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`86.
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`In the alternative, Rose, Shelby and Dirden failed to exercise reasonable
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`care as to SHE Beverage’s use of investor funds, by not purchasing beverage
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`inventory consistent with their representations to investors.
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`COMPLAINT
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`12
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 13 of 29 Page ID #:13
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`87. Rose, Shelby and Dirden also misappropriated investor funds.
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`88. The 2017 OM did not disclose that any proceeds would be used for
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`executive compensation.
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`89. The 2018 PPM represented that approximately 20% of the offering
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`proceeds, or $3 million (representing 20% of the $15 million of offering proceeds
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`actually raised), would be used for sales, salaries and marketing.
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`90. However, between 2016 and 2021, Rose, Shelby and Dirden took out at
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`least $7.5 million in investor proceeds, as follows:
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`(a)
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`approximately $6 million in cash withdrawals and transfers to
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`Rose, Shelby and Dirden’s personal bank accounts;
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`(b)
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`(c)
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`approximately $1.2 million spent at casinos;
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`approximately $180,000 to purchase 8 cars and trucks for personal
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`use and for payment of a title loan on Shelby’s Porsche;
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`(d)
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`approximately $100,000 in payments for the lease on the house
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`occupied by Rose and Shelby; and
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`(e)
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`approximately $50,000 in purchases from luxury clothing retailers
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`such as Gucci and Louis Vuitton.
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`91. The amounts Rose, Shelby and Dirden received from the offering
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`proceeds materially exceeded the amount allocated for the entire company’s sales,
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`salary and marketing expenses in the 2018 PPM.
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`92.
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`Investors were not told that SHE Beverage’s principals would use
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`investor money for their personal expenses.
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`93. Reasonable investors would have found it important to their investment
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`decision to know that SHE Beverage’s principals used roughly half of all proceeds to
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`pay their personal expenses and for cash withdrawals.
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`94. Defendants Rose, Shelby and Dirden knew, or were reckless in not
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`knowing, that they were misappropriating investor funds.
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`95.
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`In the alternative, Rose, Shelby and Dirden failed to exercise reasonable
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`COMPLAINT
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`13
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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 14 of 29 Page ID #:14
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`care as to their expenditures of investor funds.
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`2.
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`Defendants falsely represented the amount of revenues earned
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`from product sales
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`96. The 2018 PPM represented that “[t]he Company is a relatively new
`
`venture, which has generated approximately $4-5 million dollars in revenue and has
`
`an average profit margin of 40% across the span of its product lines.”
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`97. The product lines identified in the 2018 PPM were beer and bottled
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`water.
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`98. The PPM 2018 PPM did not identify events as a source of revenues.
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`99. The statement that the company had generated $4-5 million dollars in
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`revenue was false.
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`100. As of the end of fiscal year 2018, SHE Beverage had sold less than
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`$263,000 of merchandise.
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`101. SHE Beverage’s audited financial statements, disclosed for the first time
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`to investors with the company’s January 2020 Form S-1 filed with the SEC, stated
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`that the company had only the following revenues as of December 31, 2017 and
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`December 31, 2018:
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`
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`REVENUE
`
`Year ended Dec. 31, 2018
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`Year ended Dec. 31, 2017
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`Event revenue
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`$1,628,875
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`$1,569,690
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`Merchandise revenue
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`$110,324
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`$152,670
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`Total revenue
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`$1,729,199
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`$1,722,360
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`102. The company did not have $4-5 million in revenues in 2018, and of the
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`revenues it had, more than 90% was from event rentals, rather than any product sales.
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`103. Reasonable investors would have found it important to their investment
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`decision to know that SHE Beverage’s revenues did not approach the $4-5 million
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`described to investors, and that the revenues it did have came overwhelmingly from
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`COMPLAINT
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`14
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`

`

`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 15 of 29 Page ID #:15
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`
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`events.
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`104. Defendants Rose, Shelby and Dirden knew, or were reckless in not
`
`knowing, that the company’s statements of earned revenues were materially
`
`overstated and omitted the source of the majority of the company’s revenues.
`
`105. In the alternative, Rose, Shelby and Dirden failed to exercise reasonable
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`care as to their statements of revenues purportedly earned by SHE Beverage.
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`3.
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`Defendants falsely depicted the status of SHE Beverage’s
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`brewery
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`106. In or around 2018 through 2020, SHE Beverage falsely promoted to
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`prospective and actual investors that it had opened and was operating a brewery for
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`its alcoholic beverages.
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`107. For example, in or around October 2018, SHE Beverage sent an email
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`message to its existing investors promoting the “grand opening” of its Lancaster
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`brewery.
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`108. As another example, on or about December 11, 2018, SHE Beverage
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`issued a press release titled “SHE Beverage Company, Inc. Announces Acquisitions,
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`Re-Brandings, and Public Offering.”
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`109. In the December 11, 2018 press release, SHE Beverage claimed that its
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`locations included “a brewery and manufacturing site.”
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`110. The December 11, 2018 press release also stated that:
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`SHE Beverage Company has grown its brand to
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`unbelievable heights within the last four years. Opening its
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`10,000 square foot brewery in Lancaster CA…” (emphasis
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`added).
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`111. SHE Beverage repeated the description of its purported brewery in seven
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`additional press releases, from January 2019 through January 2020.
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`112. Additionally, in press releases issued on or about January 22, 2019 and
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`March 26, 2019, SHE Beverage described itself as “the female-owned and operated
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`COMPLAINT
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`15
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`

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`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 16 of 29 Page ID #:16
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`craft beer brewery...” and the “female-owned and renowned craft beer brewery…”
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`113. The 2019 Investment Guide listed a brewery as among SHE Beverage’s
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`assets.
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`114. SHE Beverage’s Form S-1 filed in January 2020, however, revealed that
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`the company was “currently in process of constructing a brewery….”
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`115. Contrary to its representations, SHE Beverage has never had an
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`operational brewery.
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`116. The only beer SHE Beverage sold to consumers came from contract
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`brewers.
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`117. As of at least January 2021, SHE Beverage had not installed the brewery
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`equipment it had purchased.
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`118. SHE Beverage had not, as of at least January 2021, completed the
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`construction of the brewery.
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`119. SHE Beverage had not, as of at least January 2021, obtained a certificate
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`of occupancy for the brewery.
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`120. Other than test batches, as of January 2021, SHE Beverage had not
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`brewed any beverages at the site of its planned brewery.
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`121. In January 2021, the California Department of Alcoholic Beverage
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`Control indefinitely suspended SHE Beverage’s small beer manufacturer license
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`because, among other reasons, SHE Beverage had not engaged in commercial beer
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`manufacturing.
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`122. Reasonable investors would have found it important to their investment
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`decision to know that SHE Beverage’s brewery was not yet constructed, nor
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`operational.
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`123. Defendants Rose, Shelby and Dirden knew, or were reckless in not
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`knowing, that the company’s statements regarding the status of its brewery were false
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`and misleading.
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`124. In the alternative, Rose, Shelby and Dirden failed to exercise reasonable
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`COMPLAINT
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`16
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`

`

`Case 2:21-cv-07339-CAS-AS Document 1 Filed 09/14/21 Page 17 of 29 Page ID #:17
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`care as to SHE Beverage’s statements regarding the status of its purported brewery.
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`4.
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`Defendants misrepresented the status of SHE Beverage’s
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`“proprietary” water formula
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`125. Defendants falsely represented in the 2018 PPM that SHE Beverage sold
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`bottled water made with a proprietary formula that cured can

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