Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 1 of 28 PageID.1
`
`PATRICK R. COSTELLO (FL Bar # 75034)
`Securities and Exchange Commission
`100 F Street NE
`Washington, DC 20549-5949
`Telephone: (202) 551-3982
`Facsimile: (202) 772-9282
`Email: costellop@sec.gov
`Admitted Pursuant to LR 83.1(c)(1)
`
`Attorney for Plaintiff
`
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF HAWAII
`
`Plaintiff,
`
`
`
`vs.
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`
`
`
`
`
`SEMISUB, INC., CURTISS EDWARD
`JACKSON, and JAMEY DENISE
`JACKSON,
`
`
`
`
`
`
`Defendants.
`
`CIVIL NO.
`
`
`COMPLAINT
`
`Jury Trial Demanded
`
`
`
`
`
`
`
`
`
`
`Plaintiff Securities and Exchange Commission alleges:
`
`I.
`
`INTRODUCTION
`
`1.
`
`The Commission brings this action to enjoin Defendants from
`
`violating the federal securities laws and for other relief. From no later than January
`
` 
`
`- 1 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 2 of 28 PageID.2
`
`2017 through at least February 2022, Defendants Curtiss Edward Jackson
`
`(“Curtiss”) and Jamey Denise Jackson (“Denise”) – acting through Defendant
`
`Semisub, Inc. (“Semisub”) – misappropriated at least $1.5 million from investors
`
`in the company. During that time period, Defendants raised approximately $4.7
`
`million from over one hundred individuals in the United States through the offer
`
`and sale of securities in Semisub. In connection with the offer and sale of those
`
`securities, Defendants engaged in a scheme to defraud investors, and also engaged
`
`in practices that operated as a fraud or deceit upon those investors. In addition,
`
`Curtiss and Semisub repeatedly made untrue statements of material fact to those
`
`investors.
`
`2.
`
`Defendants solicited investments in the form of common stock,
`
`preferred shares and promissory notes, purportedly for the purpose of construction
`
`and operation of a partially submersible vessel that would be used for commercial
`
`sightseeing
`
`tours
`
`in Hawaii. Through offering documents and other
`
`communications, Defendants told investors their funds would be used to construct
`
`that vessel and then construct and market additional vessels to potential buyers.
`
`3.
`
`Notwithstanding
`
`these
`
`representations, however, Defendants
`
`misappropriated a significant portion of the funds raised to pay for their own
`
`personal expenses – including, among other things, a home rental in Hawaii,
`
`mortgage payments for a second home in California, car leases, clothing, haircuts,
`
` 
`
`- 2 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 3 of 28 PageID.3
`
`nail salons, groceries, psychics and recreational drugs. To perpetuate the fraud and
`
`solicit additional funds to support their extravagant spending, Defendants
`
`repeatedly lied to investors about the status of construction of the vessel and
`
`potential business relationships with reputable entities and organizations. To
`
`conceal the fraud, Defendants provided misleading financial information to
`
`investors.
`
`4.
`
`As a result of the conduct alleged in this Complaint, Defendants
`
`violated Section 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §
`
`77q(a); and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934
`
`(“Exchange Act”), 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Unless restrained
`
`and enjoined, Defendants are reasonably likely to continue to violate the federal
`
`securities laws.
`
`5.
`
`The Commission therefore respectfully requests the Court enter: (i)
`
`permanent injunctions restraining and enjoining Defendants from violating the
`
`federal securities laws alleged in this Complaint; (ii) an order directing Defendants
`
`to pay disgorgement with prejudgment interest on a joint and several basis; and (iii)
`
`an order directing each Defendant to pay a civil money penalty.
`
`II. DEFENDANTS
`
`6.
`
`Curtiss, age 69, is a resident of Honolulu, Hawaii. He is the founder
`
`of Semisub, and during the relevant time period, served as the chief executive
`
` 
`
`- 3 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 4 of 28 PageID.4
`
`officer of the company. In that capacity, he directed all aspects of the company’s
`
`business, including its operations, online presence, communications with investors,
`
`and finances, and had control of the company’s bank accounts. He is married to
`
`Denise and was so during the relevant time period. By virtue of his status as an
`
`officer and control person of Semisub, the actions he undertook as described more
`
`fully herein may be imputed to the company. On or about November 5, 2009, the
`
`California Department of Corporations issued a desist-and-refrain order against
`
`Curtiss that, among other things: (i) ordered him to cease and desist from the offer
`
`or sale of securities in California; and (ii) determined that he made or caused to be
`
`made misrepresentations or omissions of material fact in connection with an offer
`
`or sale of securities in violation of section 25401 of the California Corporate
`
`Securities Law of 1968.
`
`7.
`
`Denise, age 58, is a resident of Lake Worth, Florida. During the
`
`relevant time period, she served as president of Semisub. In that capacity, she
`
`directed all aspects of the company’s business, including its operations, online
`
`presence, communications with investors, and finances, and had control of the
`
`company’s bank accounts. She is married to Curtiss and was so during the relevant
`
`time period. By virtue of her status as an officer and control person of Semisub,
`
`the actions she undertook as described more fully herein may be imputed to the
`
`company.
`
` 
`
`- 4 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 5 of 28 PageID.5
`
`8.
`
`Semisub is a Nevada corporation with its principal place of business
`
`in Honolulu, Hawaii. During the relevant time period, Curtiss and Denise served
`
`as its principal officers and control persons as described above. The company was
`
`formed in 2009 as a successor to Semisub, Inc. CA (“Semisub CA”) as part of a
`
`corporate restructuring as further described below. From 2017 through February
`
`2022 alone, at least 129 investors purchased at least $4.7 million in securities of
`
`Semisub.
`
`III. RELATED ENTITIES
`
`9.
`
`Semisub LLC is organized in California and has a principal place of
`
`business in Honolulu, Hawaii. During the relevant time period, it was managed by
`
`Semisub and was formed ostensibly to own and construct Semisub One (“Semisub
`
`One”), a partially submersible vessel that would be used for commercial sightseeing
`
`tours in Hawaii. Registration records reveal, however, that at least as early as 2014,
`
`title of the vessel actually was held by Semisub. During the relevant time period,
`
`Curtiss and Denise were members and served as the control persons of Semisub
`
`LLC. On or about November 5, 2009, the California Department of Corporations
`
`issued a desist-and-refrain order against Semisub LLC that, among other things,
`
`ordered it to cease and desist from the offer or sale of securities in California.
`
`10. Semisub CA was a California corporation with its last principal place
`
`of business in Honolulu, Hawaii. Curtiss was the founder of Semisub CA and
`
` 
`
`- 5 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 6 of 28 PageID.6
`
`served as its chief executive officer. On or about November 5, 2009, the California
`
`Department of Corporations issued a desist-and-refrain order against Semisub CA
`
`that, among other things: (i) ordered it to cease and desist from the offer or sale of
`
`securities in California; and (ii) determined that it made or caused to be made
`
`misrepresentations or omissions of material fact in connection with an offer or sale
`
`of securities in violation of section 25401 of the California Corporate Securities
`
`Law of 1968. Semisub CA thereafter underwent a restructuring and transferred all
`
`of its assets to Semisub. Semisub CA’s registration ultimately was suspended by
`
`the California Secretary of State in 2019.
`
`IV. JURISDICTION AND VENUE
`
`11. The Court has subject matter jurisdiction over this action pursuant to
`
`Sections 20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d)
`
`and 77v(a); and Sections 21(d) and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d)
`
`and 78aa(a).
`
`12. The Court has personal jurisdiction over Defendants and venue is
`
`proper in this District pursuant to Section 22(a) of the Securities Act, 15 U.S.C. §
`
`77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a), because,
`
`among other things, Curtiss resides in this District; Semisub has its principal place
`
`of business in this District; and some or all of the acts and transactions in which
`
`Defendants engaged and that constitute violations of the federal securities laws
`
` 
`
`- 6 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 7 of 28 PageID.7
`
`occurred in this District.
`
`13.
`
`In connection with the conduct alleged in this Complaint, Defendants,
`
`directly and indirectly, singly or in concert with others, have made use of the means
`
`or instrumentalities of interstate commerce, the means or instruments of
`
`transportation or communication in interstate commerce, the mails, and/or the
`
`facilities of a national securities exchange – namely, through Defendants’ use of
`
`the Internet and email correspondence when conducting the acts and transactions
`
`described herein.
`
`V.
`
`FACTUAL BACKGROUND
`
`A.
`
`Formation of Semisub
`
`14. Curtiss formed Semisub CA and Semisub LLC in California in 2003
`
`with the stated purpose of constructing and later operating a partially submersible
`
`vessel for tourism. Semisub One was marketed to investors as a catamaran-style
`
`boat with windows that would be fully submerged underwater for better viewing.
`
`15.
`
`In 2005, Curtiss began raising funds from investors by selling
`
`membership interests in Semisub LLC, and a year later, by selling shares in
`
`Semisub CA. In 2009, the California Department of Corporations issued the desist-
`
`and-refrain orders described above against both entities and Curtiss. Shortly
`
`thereafter, Curtiss formed Semisub as a Nevada corporation. The offering
`
`documents for Semisub described, among other things, the restructuring of Semisub
`
` 
`
`- 7 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 8 of 28 PageID.8
`
`CA and the transfer of its assets to Semisub. Defendants operated Semisub in
`
`California until November 2010, at which point they relocated the company to
`
`Hawaii, where it currently is based.1
`
`16. For years, Defendants solicited investments, assuring investors
`
`Semisub One was under construction and would soon be ready. As described more
`
`fully below, however, the boat was not legally operable until July 2019 when
`
`Defendants finally obtained a certificate of inspection for Semisub One from the
`
`U.S. Coast Guard (“USCG”). Months later, the boat was shut down by the USCG
`
`as a result of problems with its engine, and Semisub ceased operations entirely in
`
`March 2020 at the beginning of the Covid-19 pandemic. On or about February 1,
`
`2022, Curtiss emailed investors and stated Semisub planned to reopen within the
`
`next few months.
`
`B. Defendants Offer and Sell Securities in Semisub
`
`17. Given that Semisub One only operated for a few months, Semisub’s
`
`main source of funding was money raised from investors through the sale of
`
`securities.
`
`18. Between January 2017 and February 2022, Defendants raised
`
`approximately $4.7 million from investors in Semisub. Sales of securities during
`
`                                                            
`1 While Defendants solicited investments relating to Semisub One beginning in
`2005, this Complaint concerns only the time period of 2017 to the present.
`- 8 - 
`
` 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 9 of 28 PageID.9
`
`this period consisted mainly of: (i) contacting existing investors by email directly
`
`through periodic investor updates and requesting additional funds in exchange for
`
`more shares; (ii) selling shares to new investors typically based on referrals from
`
`existing investors; and (iii) using promoters to secure investments from new or
`
`existing investors in exchange for payment of commissions.
`
`19. Throughout the relevant time period, the primary offering document
`
`Defendants provided to investors was a private placement memorandum (“PPM”)
`
`initially created in December 2009. Defendants provided the PPM to investors
`
`through third-party shipping and mailing services like UPS. Semisub reused the
`
`PPM in its solicitation of funds throughout the relevant time period. In a number
`
`of instances, Semisub added executive summaries, which consisted of several pages
`
`concerning the specific terms of that offering, and attached the PPM as an exhibit.
`
`On other occasions, Defendants did not provide the PPM to investors, but rather
`
`only a subscription agreement attached to an email and referencing the PPM – and
`
`at times, only the signature page for the subscription agreement was sent.
`
`20. The PPM and executive summaries stated, among other things, that
`
`investor funds paid to Semisub would be used to make loans to Semisub LLC for
`
`the purpose of completing the construction and subsequent operation of Semisub
`
`One, and that the loans would bear an annual interest rate of 10%.
`
`21. To attract investors, Semisub frequently promised that construction of
`
` 
`
`- 9 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 10 of 28 PageID.10
`
`Semisub One would be completed shortly and that operations would commence
`
`imminently, but that additional funds were required in order to bring Semisub One
`
`over the finish line. In addition, investors were told Semisub’s plan was to
`
`transition its business to the construction and sale of a fleet of additional vessels
`
`around the world for tens of millions of dollars per vessel. For example, Curtiss
`
`sent emails to investors stating:
`
`
`
`
`
`
`
`
`
`November 16 and 26, 2018: “[T]he construction of Semisub
`One is complete” and “We will be putting out a new raise of one
`million shares, [sic] to accelerate the sales and marketing, this
`will be open to new investors at one dollar fifty Cents [sic]. I
`have been asked by some partners to let them know when we will
`close out this round well I am letting you know, twenty five cent
`shares will close in the next two weeks so we can start the new
`investors round at $1.50 per share, you can’t have two offerings
`open at the same time.”
`
`April 1, 2019: “We are at the finish line…. We have a date to
`haul out on April 8th and will be Coast Guard inspected and go
`back in water on April 11th and get our COI. We have everything
`else in place to go into operation….I am requesting that everyone
`that can increase there [sic] position buy [sic] $1,000 to $2,000
`to get us over this last hump and have a great grand opening.”
`(emphasis in original).
`
`January 3, 2020: “To fund our burn rate until we hit the break
`even anticipated in the next 30-45 days and the new construction
`start up costs we need to raise $500,000. For this last push we
`are offering shares at .05 cents our lowest price ever, with the
`goal I need to raise $500,000.” (emphasis in original).
`
`July 12, 2021: “Semisub is finally going back into operation….
`Currently, we are in need [sic] help financially to get through
`next 30 days. Most of the companies that Book us are on a net
`30 program. Unfortunately, payroll and catering and other
`- 10 - 
`
`
`
`
`
` 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 11 of 28 PageID.11
`
`essentials still need to be taken care of, if you can assist us in
`anyway, please help us get over this hump, please contact me
`ASAP Curtiss Jackson….”
`
`22. Denise, as president of Semisub, sent offering materials, subscription
`
`
`
`agreements and stock certificates to investors by mail, and communicated with
`
`them by phone and email concerning their investments. She also maintained
`
`records regarding investments, managed the books and bank accounts of Semisub,
`
`and participated in the preparation and review of investor update emails, with
`
`Curtiss often dictating the contents to her directly or providing a dictation made on
`
`his phone.
`
`C. Defendants Misappropriate a Significant Amount of the Funds
`
`Raised and then Conceal the Fraud from Investors
`
`23. Despite the representations in the PPM and executive summaries,
`
`Semisub did not make any formal loans to Semisub LLC and the latter did not pay
`
`interest on any such loans to Semisub. Rather, investor funds remained in bank
`
`accounts held by Semisub over which Curtiss and Denise exercised control.
`
`Defendants therefore knew, or were reckless in not knowing, investor funds were
`
`not being used for the stated purpose of providing interest-bearing loans to Semisub
`
`LLC.
`
`24. Moreover, beginning at least as early as January 2017 and continuing
`
`through at least February 2022, Curtiss and Denise accessed Semisub’s bank
`
` 
`
`- 11 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 12 of 28 PageID.12
`
`accounts and spent approximately one third of the $4.7 million raised from
`
`investors on their own personal expenses unrelated to the construction and
`
`operation of Semisub One or any of the purported additional vessels. These
`
`expenses include, but are not limited to: (i) approximately $8,500 per month in rent
`
`for their residence in Hawaii; (ii) approximately $2,300 per month to pay the
`
`mortgage on their home in California while they were living in Hawaii; (iii)
`
`approximately $1,400 per month for car leases, including a Mercedes for Curtiss;
`
`(iv) approximately $27,000 per year on food and groceries; (v) approximately
`
`$23,000 in personal retail expenses, including clothing, haircuts, and visits to nail
`
`salons; (vi) over $167,000 in personal credit card bills; and (v) over $200,000 in
`
`cash used for such activities as psychics and recreational drugs. In addition to these
`
`expenditures, Semisub paid Denise an annual salary of approximately $150,000
`
`from at least September 2017 through March 2020.
`
`25. As officers of Semisub, and given their control over Semisub’s bank
`
`accounts, Curtiss and Denise knew, or were reckless in not knowing, they were
`
`personally enriching themselves at the expense of investors, and that a substantial
`
`portion of investor funds was not being used for the stated purpose of completing
`
`the construction and subsequent operation of Semisub One.
`
`26.
`
`In addition, given their marital status and control over Semisub’s
`
`operations and bank accounts, Curtiss and Denise effectively acted as partners in
`
` 
`
`- 12 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 13 of 28 PageID.13
`
`the misappropriation of investor funds. They engaged in concerted wrongdoing to
`
`benefit themselves substantially and defraud investors. Moreover, neither Curtiss
`
`nor Denise was a mere passive recipient of investor funds. Rather, both took
`
`affirmative steps to misappropriate investor money and enjoyed the fruits of their
`
`fraud, living comfortably on funds to which they were not entitled.
`
`27.
`
`In order to conceal the misappropriation of funds and perpetuate their
`
`fraud, Defendants routinely refused to provide financial information to investors
`
`when requested. For example, on or about November 17, 2018, one investor
`
`emailed Semisub inquiring as to why she had not received an invite to participate
`
`in an investor update conference call. In her response email, Denise accused the
`
`unwitting investor of being part of a group of investors who allegedly made
`
`negative accusations against the company to a newspaper. Denise stated in
`
`reference to the accusations: “That’s why we have not updated you all. There will
`
`still be consequences to come, due to that alone.”
`
`28. On another occasion, on or about February 26, 2018, an investor
`
`emailed Curtiss:
`
`[We] investors want the accounting of all monies and clear supervision
`of future income and expenses, not to mention distribution of profits.
`It’s a ridiculous fact that Curtis’s [sic] have never provided this already.
`
`
`Curtiss responded subsequently by email:
`
` We have a third party accounting firm! If you think we are living like
`kings you are nuts! We work are [sic] ass off and rest all weekend we
`
` 
`
`- 13 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 14 of 28 PageID.14
`
`go to church on Sunday! My big thing for the weak [sic] is NASCAR
`on Sunday! We have not been on a vacation in 10 years! You have
`some nerve!
`
`29. Despite representing otherwise, Curtiss and Denise in fact had used
`
`investor funds for vacations and other travel-related expenses on trips to, among
`
`other places, California, the Big Island in Hawaii, and Disney.
`
`30.
`
`In another instance, on or about November 11, 2017, Curtiss emailed
`
`Semisub’s general manager instructing him not to respond to an investor who asked
`
`for financial statements and when investors could expect a return on their
`
`investment because it was “none of his bis [sic].”
`
`31. When Defendants did, on occasion, provide limited financial
`
`information to investors by way of pro formas describing expected future operating
`
`costs and profits, those documents were misleading and omitted any reference to
`
`Curtiss or Denise using investor funds for their own personal benefit.
`
`32. For example, pro formas sent to investors during the relevant time
`
`period purported to present Semisub’s expenses, including, among other things,
`
`employee salaries, office rental, utilities, and vessel operation costs, but did not
`
`include amounts Curtiss and Denise spent on themselves, such as Denise’s salary
`
`and benefits, the monthly rent and utilities for their residence, their car lease
`
`payments or their auto insurance premiums. Nevertheless, a subsequent internal
`
`pro forma from 2020, which never appears to have been sent to investors, contained
`
` 
`
`- 14 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 15 of 28 PageID.15
`
`a separate “Corp Expenses” section that delineated amounts for per diem payments
`
`to Curtiss and Denise, corporate housing lease and utilities, Mercedes lease, Honda
`
`lease, and auto insurance. This internal pro forma also reflected Denise’s
`
`compensation in the form of an annual salary of $150,000 and benefits of $33,000.
`
`These “Corp Expenses” and compensation and benefit payments to Denise all were
`
`amounts Defendants had been incurring during the time when the misleading pro
`
`formas were sent to investors. Defendants therefore knew, or were reckless in not
`
`knowing, the financial information being provided to investors was misleading.
`
`33. To round out their concealment of the misappropriation, Curtiss and
`
`Denise also failed to disclose to the Internal Revenue Service any of the amounts
`
`they used for personal expenses as income on their tax returns.
`
`D. Curtiss and Semisub Made Materially False and Misleading
`
`Statements to Investors
`
`34. As part of the fraud, Curtiss and Semisub routinely made false and
`
`misleading statements to investors in order to solicit additional funds that would be
`
`used to support Curtiss’s and Denise’s lifestyle.
`
`
`
`(1) Use of Investor Funds
`
`35. As alleged above, the PPM and executive summaries stated, among
`
`other things, that investor funds paid to Semisub would be used to make loans to
`
`Semisub LLC for the purpose of completing the construction and then subsequent
`
` 
`
`- 15 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 16 of 28 PageID.16
`
`operation of Semisub One.
`
`36.
`
`In addition, when Curtiss and Semisub solicited funds from investors,
`
`those requests ostensibly would be tied to specific needs of the business. For
`
`example, as described above, on November 16 and 26, 2018, Curtiss emailed
`
`investors on behalf of Semisub seeking additional funds “to accelerate the sales and
`
`marketing” of the company. On April 1, 2019, Curtiss emailed investors on behalf
`
`of Semisub requesting more funds for Semisub “to get over this last hump and have
`
`a great grand opening.” Later, on January 3, 2020, Curtiss emailed investors on
`
`behalf of Semisub because the company purportedly needed funds “[t]o fund our
`
`burn rate until we hit the break even . . . and the new construction start up costs.”
`
`And on July 12, 2021, Curtiss emailed investors on behalf of Semisub advising
`
`them the company was going back into operation and “need[ed] help financially to
`
`get through next 30 days” citing specific items such as payroll and catering costs.
`
`37. Each time Semisub and Curtiss provided the PPM and/or executive
`
`summaries to investors, Curtiss knew, or was reckless in not knowing, the
`
`statements in those documents regarding the use of investor funds were false and
`
`misleading, both because (i) no investor funds were being loaned to Semisub LLC,
`
`and (ii) he and Denise had been misappropriating a substantial portion of those
`
`funds for their own personal benefit.
`
`38.
`
`In addition, at the time that he sent the above-described emails to
`
` 
`
`- 16 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 17 of 28 PageID.17
`
`investors, Curtiss knew, or was reckless in not knowing, the statements in those
`
`emails were false and misleading because he and Denise (i) had been
`
`misappropriating a substantial portion of investor funds to pay for personal
`
`expenses; and (ii) had concealed the misappropriation from investors as described
`
`above, including by providing inaccurate, incomplete, and misleading pro formas.
`
`39. These statements were material because a reasonable investor would
`
`expect his or her funds to be used for the stated purpose of completing the
`
`construction and subsequent operation of Semisub One, and the fact that funds
`
`instead were being used to fuel personal spending would have been important to
`
`his or her investment decision.
`
`
`
`(2) Business Partnerships
`
`40. From the outset, Curtiss and Semisub told investors the company’s
`
`true profitability would come from the construction and sale of additional vessels
`
`beyond Semisub One, by way of partnerships or joint ventures with other
`
`businesses. Indeed, the PPM itself states in pertinent part: “The principal purposes
`
`for this offering are to increase our working capital to enable us to make additional
`
`loans to Semisub LLC to complete construction and delivery of [Semisub One],
`
`and to market Vessels to other potential buyers.” The PPM goes on to note that
`
`“[t]he business of constructing and selling new Vessels for commercial or
`
`government use will also be launched by the Company.” In soliciting additional
`
` 
`
`- 17 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 18 of 28 PageID.18
`
`funds from investors, Curtiss repeatedly misrepresented the existence of these
`
`partnerships and joint ventures.
`
`41. For example, in email updates on June 8, 2017 and August 8, 2017,
`
`Curtiss told investors that Semisub, in conjunction with Viking Systems
`
`(“Viking”), a marine engineering firm, was working on two specially-designed
`
`ships to be used by the Department of Homeland Security (“DHS”) and an
`
`organization called Marine Biology Studies (“MBS”). These statements were false,
`
`however, because DHS did not have any relationship with Semisub, Viking had not
`
`done any work on any designs for DHS or MBS vessels, and Semisub had not had
`
`any discussions or entered into any agreements with DHS or MBS. Curtiss knew,
`
`or was reckless in not knowing, these statements were false because he had not had
`
`any communications with either DHS or MBS about any such relationship with
`
`Semisub.
`
`42. Similarly, in email updates on February 26, 2018, November 13, 2018
`
`and November 26, 2018, Curtiss repeatedly told investors Semisub would enter into
`
`a joint venture with a private equity fund to operate additional vessels. During
`
`investor calls on April 4, 2019 and April 5, 2019, he identified BlackRock, a private
`
`equity fund, as a potential business partner, and told investors BlackRock was
`
`interested in investing in Semisub. These statements were false, however, because
`
`BlackRock did not have any relationship with Semisub. Curtiss knew, or was
`
` 
`
`- 18 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 19 of 28 PageID.19
`
`reckless in not knowing, these statements were false because he had not had any
`
`communications with BlackRock about any such investment.
`
`43. These statements were material because a reasonable investor would
`
`have expected Semisub to be engaged in the very activity described in the PPM
`
`(i.e., building, selling, and marketing additional vessels) and to be engaged in the
`
`ventures and partnerships that Curtiss described, and would have considered it
`
`important to his or her investment decision to know that, in fact, Semisub was not
`
`building, marketing, or selling additional vessels and had not entered into any such
`
`ventures or partnerships.
`
`
`
`(3) Status of Semisub One and the Company
`
`44. Curtiss and Semisub routinely made false statements to investors
`
`about the status of Semisub One and the company, all in an effort to keep investor
`
`funds flowing into the company’s bank accounts.
`
`45.
`
`In fact, from the very beginning, Curtiss misrepresented the status of
`
`the vessel. The 2009 PPM itself states in pertinent part: “We have completed the
`
`hull and major structural components of [Semisub One], and estimate that
`
`approximately 90% of the construction of [Semisub One] has so far been
`
`completed.” That statement was false, however, because by 2017 (eight years
`
`later), Semisub One still was not complete or even operational. Indeed, on
`
`December 1, 2017, Curtiss emailed investors and said: “We are looking at a
`
` 
`
`- 19 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 20 of 28 PageID.20
`
`completion date towards the end of December and the COI [Certificate of
`
`Inspection] sooner.” In reality, Semisub did not receive a COI until July 2019 and
`
`tours did not begin until November 2019.
`
`46. Throughout the relevant time period, Curtiss and Semisub continued
`
`to misrepresent the status of Semisub One. For example, on August 23, 2018,
`
`Curtiss emailed an update to investors and said: “We intend to have a soft opening
`
`within the next three weeks and will schedule a celebration and grand opening
`
`approximately 30 days after that.”
`
`47. At the time he sent this email, however, Curtiss knew, or was reckless
`
`in not knowing, this timing would not be possible. Semisub had only submitted its
`
`electrical drawings to the USCG for approval a few weeks earlier on August 3,
`
`2018. In addition, on August 15, 2018, Curtiss received an email from a USCG
`
`employee stating she hoped to start her review on August 17 and explaining the
`
`USCG would have 30 days to review the submission. Curtiss also knew, or was
`
`reckless in not knowing, that after receiving approval for the drawings, Semisub
`
`then would need to have the electrical system physically inspected and approved
`
`by the local USCG office.
`
`48. On November 13, 2018, Curtiss sent another email update to investors
`
`stating that “I am happy to let you know that Semisub One is completed. We intend
`
`to put Semisub One into operations by the end of this month….” On conference
`
` 
`
`- 20 - 
`
`

`

`Case 1:22-cv-00349-SOM-KJM Document 1 Filed 08/03/22 Page 21 of 28 PageID.21
`
`calls with investors approximately one week later, Curtiss asked investors to
`
`contribute more money to the company as part of a closing offering and/or a
`
`forthcoming offering.
`
`49. Despite these representations to investors, Curtiss knew, or was
`
`reckless in not knowing, that Semisub One was not completed and would not be
`
`put into operation shortly. Indeed, just two weeks before that November 13 email,
`
`Curtiss received a letter from the USCG on October 29, 2018, requiring Semisub
`
`to retain a licensed professional engineer to verify the boat was being built in
`
`accordance with USCG approved plans as a result of having prior repeated failed
`
`inspections. The letter stated in pertinent part:
`
` Prior to my inspectors attending your vessel, I am requiring that you
`provide written attestation from a licensed Professional Engineer
`verifying