throbber
Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 1 of 19 PageID# 1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`Case No. 1:20-cv-853
`
`JURY TRIAL DEMANDED
`
`SECURITIES AND EXCHANGE COMMISSION,
`
`Plaintiff,
`
`v.
`
`DANIEL K. BOICE and TRUSTIFY, INC.,
`
`Defendants,
`
`and
`
`GOLEAN DC, LLC, and
`JENNIFER MELLON,
`
`Relief Defendants.
`
`COMPLAINT
`
`Plaintiff Securities and Exchange Commission (the “Commission”) files this Complaint
`
`against defendants Daniel K. Boice (“Boice”) and Trustify, Inc. (“Trustify”) (collectively,
`
`“Defendants”) and relief defendants GoLean DC, LLC (“GoLean”) and Jennifer Mellon
`
`(“Mellon”) and alleges as follows:
`
`SUMMARY
`
`1.
`
`This matter concerns an offering fraud conducted by Boice through his company,
`
`Trustify, an online marketplace designed to connect customers to a network of private
`
`investigators.
`
`2.
`
`Between 2015 and 2018, Defendants raised over $18.5 million from more than 90
`
`investors by making materially false and misleading statements and omissions about, among
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 2 of 19 PageID# 2
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`other things, Trustify’s revenue growth, its corporate client base and size of its investigator
`
`network, and the use of investor funds.
`
`3.
`
`Boice also defrauded Trustify’s largest existing investor into reinvesting $1.957
`
`million by, among other things, providing a false document stating that an influential investment
`
`bank had joined as lead investor for that round—something the investor required prior to giving
`
`Trustify the money.
`
`4.
`
`Although Boice held Trustify out to investors as a successful technology start-up
`
`with growing revenues and a strong corporate client base, Trustify was a failing business.
`
`5.
`
`By the fall of 2018, Trustify was unable to pay its vendors and employees and
`
`effectively ceased operations. Yet Boice continued to solicit funds from investors without
`
`notifying existing or prospective investors of Trustify’s dire financial condition.
`
`6.
`
`Boice misappropriated at least $8 million of investor funds to pay for personal
`
`expenses for himself and his then-wife and colleague, Jennifer Mellon, including private jet
`
`charters, vacations, a luxury car, jewelry, and mortgage payments on their personal residence and
`
`a beach house. Boice also diverted hundreds of thousands of dollars to his purported consulting
`
`company, GoLean.
`
`7.
`
`By engaging in the conduct described in this Complaint, Defendants violated, and
`
`unless enjoined will continue to violate, Section 17(a) of the Securities Act of 1933 (“Securities
`
`Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange
`
`Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
`
`8.
`
`Relief Defendants GoLean and Mellon have been unjustly enriched, as they
`
`received proceeds of the fraud to which they had no legitimate claim.
`
`
`
`2
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 3 of 19 PageID# 3
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`JURISDICTION AND VENUE
`
`9.
`
`The Commission brings this action pursuant to Sections 20(b) and 20(d) of the
`
`Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange
`
`Act [15 U.S.C. §§ 78u(d) and 78u(e)] to enjoin such acts, transactions, practices, and courses of
`
`business, and to obtain disgorgement, prejudgment interest, civil money penalties, and such other
`
`and further relief as the Court may deem just and appropriate.
`
`10.
`
`This Court has 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), 21(e),
`
`and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
`
`11.
`
`Venue in this district is proper pursuant to Section 22(a) of the Securities Act [15
`
`U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. Defendant Boice
`
`resided in this district at all times relevant to this Complaint, and this district was the principal
`
`place of business for Defendant Trustify and Relief Defendant GoLean. Relief Defendant
`
`Mellon also resides in the district.
`
`12.
`
`In addition, certain of the acts, practices, and courses of business constituting the
`
`violations of the federal securities laws alleged herein occurred within the Eastern District of
`
`Virginia.
`
`DEFENDANTS
`
`13.
`
`Daniel K. Boice, age 40, was a resident of Alexandria, Virginia at all times
`
`relevant to this Complaint and currently resides in Fernandina Beach, Florida. Boice founded
`
`and was the Chief Executive Officer (“CEO”) of Trustify. Boice also founded GoLean, which is
`
`described more fully below.
`
`
`
`3
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 4 of 19 PageID# 4
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`14.
`
`Trustify, Inc., formerly known as FlimFlam, is a Delaware corporation formed
`
`by Boice in 2015 that maintained an office in Arlington, Virginia. Trustify was a start-up
`
`technology company that operated an online application to connect private investigators with
`
`individuals and businesses.
`
`RELIEF DEFENDANTS
`
`15. GoLean DC, LLC is a Virginia corporation founded by Boice in June 2014 as a
`
`purported consulting company with an office address in Arlington, Virginia. As of September
`
`30, 2015, GoLean was listed as inactive on Virginia’s corporate registry for failing to pay its
`
`annual registration fee.
`
`16.
`
`Jennifer Mellon, age 38, is a resident of Alexandria, Virginia. From 2015 to late
`
`2018, Mellon was the Vice-President and Director of Trustify and was married to Defendant
`
`Boice.
`
`FACTS
`
`I.
`
`DEFENDANTS FRAUDULENTLY INDUCED INVESTORS TO BUY TRUSTIFY
`STOCK AND PROMISSORY NOTES
`
`17.
`
`Boice founded Trustify (then called FlimFlam) in January 2015 as a technology
`
`company purportedly designed to operate and maintain an online platform to connect individuals
`
`and businesses with a network of private investigators.
`
`18.
`
`Trustify’s only source of revenue was the fees earned when a customer used its
`
`technology to engage the services of an in-network private investigator.
`
`19.
`
`As Trustify’s CEO, Boice solicited investments in the company, hired a staff, and
`
`appointed a Board of Directors.
`
`20. Mellon was the President and Director of Trustify and also served on Trustify’s
`
`Board. During that time, Mellon and Boice were married and owned joint bank accounts, real
`
`
`
`4
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 5 of 19 PageID# 5
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`estate, and other assets.
`
`21.
`
`Between 2015 and 2018, Defendants conducted the following equity and debt
`
`securities offerings (collectively, the “Offerings”):
`
`Funding Round
`
`Approximate
`Start Date
`
`Approximate
`End Date
`
`Seed 1 Preferred Stock
`(“Seed 1”)
`Seed 2 Preferred Stock
`(“Seed 2”)
`Convertible Promissory Notes
`(“Note Offering”)
`Series A Preferred Stock
`(“Series A”)
`Series B Preferred Stock
`(“Series B”)
`
`2/2015
`
`12/2015
`
`12/2016
`
`5/2017
`
`3/2018
`
`11/2015
`
`12/2016
`
`5/2017
`
`10/2017
`
`7/2018
`
`Investors
`Per
`Offering
`26
`
`52
`
`23
`
`8
`
`12
`
`Total
`Invested
`
`$1,827,402
`
`$5,355,822
`
`$2,911,732
`
`$5,479,994
`
`$2,980,794
`
`22.
`
`To market Trustify’s securities to potential investors, Boice created, or caused to
`
`be created, slide presentations (“Investor Presentations”) for the Offerings. The Investor
`
`Presentations set forth, among other things, an overview of Trustify’s business, its quarterly
`
`and/or annual revenue, lists of significant clients, and the intended use of investor proceeds.
`
`23.
`
`Boice emailed quarterly updates (“Quarterly Updates”) to existing investors,
`
`which purported to set forth Trustify’s alleged successes, revenue and other “key performance
`
`indicators,” and plans for future growth, among other information.
`
`24.
`
`Boice successfully used Quarterly Updates to induce certain existing investors to
`
`make additional investments in Trustify.
`
`25.
`
`By the fall of 2018, Trustify was unable to pay its vendors and employees, yet
`
`Boice continued to solicit investments by lying to prospective investors about Trustify’s revenue,
`
`its corporate client base and the size of its investigator network, and the use of investor funds,
`
`among other things.
`
`
`
`5
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 6 of 19 PageID# 6
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`26.
`
`In total, Defendants used deceptive conduct and the material misstatements and
`
`omissions discussed herein to induce more than 90 investors located in multiple states, including
`
`those in the Eastern District of Virginia, to invest a total of approximately $18.5 million in
`
`Trustify stock and promissory notes.
`
`A.
`
`27.
`
`Defendants Misrepresented Trustify’s Quarterly and Annual Revenue
`
`From at least January 2016 through October 2018, Defendants lied about
`
`Trustify’s revenue in Investor Presentations and Quarterly Updates to give the false impression
`
`that Trustify was a successful technology start-up when, in reality, it was a failing business from
`
`the outset.
`
`28.
`
`For example, in or about May 2017, Boice falsely reported in the Investor
`
`Presentation for the Series A funding round that Trustify had earned $5 million in revenue in
`
`2016 when Trustify had earned only approximately $1.4 million – less than one third of the
`
`revenue figure Boice reported to investors.
`
`29.
`
`In March 2018, when soliciting investment in the Series B funding round, Boice
`
`included a chart in the Investor Presentation that falsely depicted steady revenue growth
`
`throughout 2017 with monthly revenue between $500,000 and nearly $800,000. In reality,
`
`Trustify’s quarterly revenue actually declined throughout 2017 from approximately $400,000 to
`
`approximately $150,000.
`
`30.
`
`To induce additional investments from existing investors, Boice emailed
`
`Quarterly Updates that contained numerous misrepresentations about Trustify’s revenue,
`
`including, among other things:
`
`
`
`6
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`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 7 of 19 PageID# 7
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`a.
`
`the Quarterly Update dated April 2, 2016, falsely stated that revenue for
`
`the first quarter of 2016 was $500,000, when, in reality, revenue was only approximately
`
`$315,237;
`
`b.
`
`the Quarterly Update dated July 5, 2016, falsely stated that revenue for the
`
`second quarter of 2016 was $774,339 – more than double the actual revenue of $315,426;
`
`c.
`
`the Quarterly Update dated October 3, 2016, falsely stated that revenue for
`
`the third quarter of 2016 was approximately $1,344,071 – nearly three times greater than the
`
`actual revenue of $389,724;
`
`d.
`
`the Quarterly Update dated May 9, 2018, falsely stated that revenue for the
`
`first quarter of 2018 grew “70% . . . over Q1 2017,” when in fact revenue had decreased by at
`
`least 45%; and
`
`e.
`
`the Quarterly Update dated October 14, 2018, falsely stated that revenue
`
`for the third quarter of 2018 had “[e]xceeded revenue goals” and “revenue numbers continue to
`
`be very strong,” when revenue had plummeted and Trustify could no longer pay its vendors or
`
`employees.
`
`31.
`
`After receiving Quarterly Updates that contained false revenue figures, among
`
`other things, several investors invested additional funds in Trustify.
`
`32.
`
`As CEO, Boice knew that the revenue figures he included in Investor
`
`Presentations and Quarterly Updates were fabricated and were designed to give investors the
`
`false impression that Trustify was a growing and viable company.
`
`B.
`
`Defendants Lied About Significant Corporate Clients and the Size of Its
`Private Investigator Network
`
`33.
`
`To mislead investors about Trustify’s success in growing its corporate customer
`
`base, Boice falsely claimed that Trustify had secured lucrative contracts with certain significant
`
`
`
`7
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 8 of 19 PageID# 8
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`corporate clients.
`
`34.
`
`In the Quarterly Updates emailed to investors in 2016 and in the Series A Investor
`
`Presentation, Boice falsely stated that Trustify had successfully contracted with a major
`
`homecare provider to vet their network of caregivers.
`
`35.
`
`Similarly, in an email to an investor in February 2016, Boice stated that Trustify
`
`“just closed that large deal with [a major homecare provider] where we’ll be vetting their 17M+
`
`care providers,” resulting in in “$100k+ [monthly recurring revenue] just from this deal alone.”
`
`36.
`
`On February 18, 2016, after receiving this information from Boice, that investor
`
`invested an additional $100,000 in Trustify.
`
`37.
`
`None of these statements were true. The homecare provider did not contract with
`
`Trustify or hire Trustify in any capacity.
`
`38.
`
`In or about May 2018, in the Series B Investor Presentation, Boice identified by
`
`logo professional sports leagues and major television networks as part of Trustify’s “New &
`
`Noteworthy Clients.”
`
`39.
`
`Boice claimed that one major television network found Trustify “organically” by
`
`using Trustify’s website, and quoted an alleged representative from the network saying:
`
`“Trustify has provided us a new capability when it comes to quickly vetting information.”
`
`40.
`
`These representations were false. The major professional sports leagues and
`
`television networks that Boice touted as clients in the Series B Investor Presentation were not
`
`clients of Trustify. To further exaggerate the growth and reach of the company, Boice repeatedly
`
`claimed in Investor Presentations and Quarterly Updates that Trustify had thousands of private
`
`investigators.
`
`
`
`8
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 9 of 19 PageID# 9
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`41.
`
`For example, in the Investor Update dated January 2016, Trustify announced it
`
`had over 4,000 investigators in network when, at its busiest, Trustify had only 600 in-network
`
`investigators, only a fraction of whom ever performed work for the company.
`
`C.
`
`Defendants Misrepresented the Intended use of Investor Proceeds and
`Misappropriated Investor Funds.
`
`42.
`
`In subscription agreements (“Subscription Agreements) and terms sheets (“Term
`
`Sheets”) for the Offerings, Defendants represented to investors that the proceeds from the sales
`
`of shares and promissory notes would be used for “working capital and general corporate
`
`purposes” of Trustify.
`
`43.
`
`Similarly, in Investor Presentations, Boice generally stated that half of the funds
`
`raised from investors from the Offerings would be used to develop and maintain technology,
`
`while the other half would be used for marketing and revenue growth.
`
`44.
`
`Contrary to these representations, of the more than $18.5 million raised, between
`
`March 2015 and November 2018, Boice used at least $8 million of investor money for his and
`
`Mellon’s personal benefit to support their extravagant lifestyle and failed to disclose such use of
`
`proceeds to investors.
`
`45.
`
`As early as March 2015, Boice began diverting investor funds from Trustify’s
`
`operating account to a bank account for GoLean, a company Boice alone controlled.
`
`46.
`
`Between March 2015 and December 2015, Boice diverted a total of
`
`approximately $528,000 to GoLean and used the entirety of those funds for personal expenses,
`
`including a total of approximately $300,000 for a down payment on his and Mellon’s home in
`
`Alexandria, Virginia.
`
`
`
`9
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 10 of 19 PageID# 10
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`47.
`
`Boice continued to divert investor funds to GoLean for months after Virginia’s
`
`State Corporation Commission placed GoLean on inactive status for failing to pay its annual
`
`registration fee.
`
`48. Mellon wrote checks out of the GoLean account to pay for purely personal
`
`expenses, including those related to her wedding to Boice, healthcare, private school tuition, and
`
`payments for their Alexandria home.
`
`49.
`
`In addition to the investor funds diverted to GoLean for their personal use, Boice
`
`charged more than $4 million of his and Mellon’s personal expenses to credit cards that were
`
`paid from Trustify’s business account, including $125,000 to hire a private jet to fly their
`
`children to summer camp, $10,000 on a family vacation to Canyon Ranch & Spa, $134,000 on
`
`purchases from Amazon.com, and $5,000 worth of jewelry.
`
`50.
`
`Boice also wired approximately $1,025,275 from Trustify’s bank accounts into
`
`his and Mellon’s personal joint bank account, $50,000 of which was transferred to Mellon’s
`
`personal bank account in June 2017.
`
`51.
`
`In addition, Boice spent approximately $2.2 million in the form of cash and
`
`Google/Paypal transactions.
`
`52.
`
`These expenses were totally unrelated to Trustify’s stated business purpose and
`
`were contrary to the explicit statements in the Investor Presentations, Subscription Agreements
`
`and Term Sheets concerning the use of investor proceeds. Boice never informed investors that
`
`their funds would be used to pay for his personal expenses.
`
`53.
`
`Boice knew that the statements to investors concerning the intended use of
`
`investor proceeds were false and misleading because Boice himself diverted investor funds away
`
`from Trustify to use for his and Mellon’s personal benefit.
`
`
`
`10
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 11 of 19 PageID# 11
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`II.
`
`DEFENDANTS FRAUDULENTLY INDUCED THEIR LARGEST INVESTOR TO
`INVEST AN ADDITIONAL $1.957 MILLION IN TRUSTIFY
`
`54.
`
`In June 2018, Defendants fraudulently induced an existing venture capital
`
`investor (the “Venture Capital Fund”) to invest an additional $1.957 million in Trustify’s Series
`
`B offering.
`
`55.
`
`Boice told the Venture Capital Fund that an established investment bank had
`
`agreed to be the lead investor for the Series B round. This was not true.
`
`56.
`
`The Venture Capital Fund, which previously had invested just over $4.7 million
`
`in the Series A round, agreed with Boice to wire funds for the Series B round if the following
`
`conditions were met: (1) it received confirmation that the investment bank had wired funds to
`
`Trustify; (2) the round was substantially funded prior to its investment; (3) its investment would
`
`be escrowed in a specific bank account; and (4) its investment would be returned if the Series B
`
`round did not meet its minimum investment target of $15 million.
`
`57.
`
`In June 2018, Boice caused the Venture Capital Fund to receive an email that
`
`purported to be from the investment bank’s managing partner ostensibly confirming the
`
`investment bank’s $7.5 million investment and welcoming the Venture Capital Fund to the
`
`Series B round. The email was fake.
`
`58.
`
`Based on this email and other misrepresentations, the Venture Capital Fund wired
`
`$1.957 million to Trustify on June 14, 2018 with the understanding that it would obtain shares of
`
`Series B Preferred Stock if the round closed or receive its money back.
`
`59.
`
`Contrary to his representations to the Venture Capital Fund, Boice did not place
`
`the Venture Capital Fund’s money in an escrow account. Instead, as set forth above, he used the
`
`funds for his personal expenses.
`
`
`
`11
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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 12 of 19 PageID# 12
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`III. DEFENDANTS VIOLATED THE FEDERAL SECURITIES LAWS
`
`60.
`
`61.
`
`At all relevant times, Boice operated and controlled Trustify.
`
`The preferred stock offered and convertible promissory notes sold by Defendants
`
`(the “Securities”) were securities within the meaning of the Securities Act and the Exchange Act.
`
`62.
`
`Investors provided Defendants an investment of money—at least 90 investors
`
`gave Defendants at least $18.5 million.
`
`63.
`
`Boice pooled investors’ money into bank accounts and represented that he would
`
`use those funds to operate Trustify and grow the business.
`
`64.
`
`Investors made their investment with a reasonable expectation of profits to be
`
`derived solely from Defendants’ supposed ability to generate profits without any participation by
`
`any of its investors.
`
`65.
`
`Defendants engaged in the conduct described herein, including the offer and sale
`
`of the Securities, by use of the means or instruments of transportation or communication in
`
`interstate commerce, the instrumentalities of interstate commerce, and/or by use of the mails.
`
`66.
`
`Defendants solicited investment from investors throughout the United States and
`
`abroad through the use of the internet and online platforms.
`
`67.
`
`Defendants knowingly made material untrue statements and omitted to state
`
`material facts necessary in order to make the statements made, in light of the circumstances
`
`under which they were made, not misleading.
`
`68.
`
`A reasonable investor would consider the misrepresented facts and omitted
`
`information described herein—including, among other things, misrepresentations and omissions
`
`regarding Trustify’s revenue growth, contracts with significant corporate clients, and the use of
`
`
`
`12
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`

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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 13 of 19 PageID# 13
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`investors’ money to pay for Boice’s personal expenses—important in deciding whether or not to
`
`purchase the Securities.
`
`69.
`
`The untrue statements of material fact and material omissions described herein
`
`were made in the offer or sale and in connection with the purchase or sale of securities.
`
`70.
`
`In connection with the conduct described herein, Defendants acted knowingly or
`
`recklessly. Defendants knew or were reckless in not knowing that they were making material
`
`misrepresentations and omitting to state material facts necessary to make certain statements not
`
`misleading under the circumstances.
`
`71.
`
`Defendants obtained money or property by means of untrue statements of material
`
`fact and omissions of material fact necessary in order to the make the statements made, in light
`
`of the circumstances under which they were made, not misleading. Investors sent money directly
`
`to the Defendants, and Boice took the money for his own use and benefit.
`
`72.
`
`Defendants used devices, schemes, and artifices to defraud investors, and engaged
`
`in acts, transactions, practices, or courses of business that operated as a fraud or deceit upon the
`
`investors. In addition to the numerous misrepresentations discussed herein, among other things,
`
`Defendants misled investors and misappropriated investors’ funds for Boice’s and Mellon’s
`
`personal use and benefit.
`
`IV. RELIEF DEFENDANTS BENEFITED FROM THE FRAUD
`
`73.
`
`GoLean benefited from Defendants’ fraudulent scheme. Defendant Boice
`
`diverted to GoLean at least $528,000 that came from investors who were told that they were
`
`investing in Trustify. GoLean did not provide money, goods, services, or anything else of value
`
`in exchange for these funds.
`
`
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`13
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`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 14 of 19 PageID# 14
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`74.
`
`These transfers of funds to GoLean were part of, and in furtherance of, the
`
`securities laws violations alleged herein. Therefore, GoLean has been unjustly enriched.
`
`75. Mellon benefited from Defendants’ fraudulent scheme. Mellon wrote checks for
`
`purely personal expenses, including expenses for her wedding to Boice, out of the GoLean
`
`account, which was funded almost exclusively with funds of Trustify’s investors.
`
`76.
`
`At least $150,000 of Mellon’s personal credit card charges were expensed to
`
`Trustify and paid with investor funds, including flights to the Caribbean island of Nevis, jewelry
`
`and clothing, and a family vacation to Cancun, Mexico.
`
`77. Mellon also received money in excess of her approved salary, including $50,000
`
`wired into her personal account in June 2017. Mellon did not provide money, goods, services, or
`
`anything else of value in exchange for these funds.
`
`78.
`
`The transfer of funds to Mellon, which were in excess of her salary, were part of,
`
`and in furtherance of, the securities laws violations alleged herein. Therefore, Mellon has been
`
`unjustly enriched.
`
`FIRST CLAIM FOR RELIEF
`Violations of Section 17(a) of the Securities Act
`(Against Boice and Trustify)
`
`79.
`
`The Commission re-alleges and incorporates by reference each and every
`
`allegation in paragraphs 1 through 78, above, as if the same were fully set forth herein.
`
`80.
`
`From at least March 2015 through the present, as a result of the conduct alleged
`
`herein, Defendants Boice and Trustify knowingly or recklessly or, with respect to subparts b and
`
`c below, negligently, in the offer or sale of securities, directly or indirectly, singly or in concert,
`
`by the use of the means or instruments of transportation or communication in interstate
`
`commerce, or the means or instrumentalities of interstate commerce, or the mails, or the facilities
`
`of a national securities exchange:
`
`
`
`14
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 15 of 19 PageID# 15
`
`a.
`
`b.
`
`employed devices, schemes or artifices to defraud;
`
`obtained money or property by means of, or made, untrue statements of
`
`material fact, or omitted to state material facts necessary in order to make the statements made,
`
`in light of the circumstances under which they were made, not misleading; or
`
`c.
`
`engaged in acts, transactions, practices, or courses of business that
`
`operated as a fraud or deceit upon offerees, purchasers, and prospective purchasers of securities.
`
`81.
`
`By engaging in the foregoing conduct, Defendants Boice and Trustify violated,
`
`and unless restrained and enjoined will continue to violate, Section 17(a) of the Securities Act
`
`[15 U.S.C. § 77q(a)].
`
`SECOND CLAIM FOR RELIEF
`Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
`(Against Boice and Trustify)
`
`82.
`
`The Commission realleges and incorporates by reference each and every
`
`allegation in paragraphs 1 through 78, above, as if the same were fully set forth herein.
`
`83.
`
`From at least March 2015 through the present, as a result of the conduct alleged
`
`herein, Defendants Boice and Trustify, knowingly or recklessly, in connection with the purchase
`
`or sale of securities, directly or indirectly, by use of the means or instrumentality of interstate
`
`commerce or of the mails, or a facility of a national securities exchange:
`
`a.
`
`b.
`
`employed devices, schemes or artifices to defraud;
`
`made untrue statements of material fact, or omitted to state material facts
`
`necessary in order to make the statements made, in light of the circumstances under which they
`
`were made, not misleading; or
`
`c.
`
`engaged in acts, practices, or courses of business which operated or would
`
`operate as a fraud or deceit upon any person in connection with the purchase or sale of any
`
`security.
`
`
`
`15
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 16 of 19 PageID# 16
`
`84.
`
`By engaging in the foregoing conduct, Defendants Boice and Trustify violated,
`
`and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act
`
`[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
`
`THIRD CLAIM FOR RELIEF
`(Unjust Enrichment)
`(Against Relief Defendant GoLean DC, LLC)
`
`85.
`
`The Commission re-alleges and incorporates by reference each and every
`
`allegation in paragraphs 1 through 78, inclusive, as if they were fully set forth herein.
`
`86.
`
`Between March 2015 and December 2015, Boice diverted approximately
`
`$540,885 of investor funds to GoLean via direct money transfers from Trustify’s operating
`
`account and to GoLean’s bank account, which Boice alone controlled. Boice then used the
`
`money in GoLean’s account to pay for his personal living expenses.
`
`87.
`
`GoLean obtained investor funds described above as part of, and in furtherance of,
`
`the securities law violations alleged above.
`
`88.
`
`GoLean has no legitimate claim to these ill-gotten gains, which are proceeds of
`
`the securities fraud alleged above, and it is not just, equitable, or conscionable for it to retain the
`
`funds.
`
`89.
`
`Accordingly, GoLean is liable as a relief defendant and should be required to
`
`disgorge all ill-gotten gains which inured to its benefit under the equitable doctrines of
`
`disgorgement, unjust enrichment, and/or constructive trust.
`
`FOURTH CLAIM FOR RELIEF
`(Unjust Enrichment)
`(Against Relief Defendant Jennifer Mellon)
`
`90.
`
`The Commission re-alleges and incorporates by reference each and every
`
`allegation in paragraphs 1 through 78, inclusive, as if they were fully set forth herein.
`
`
`
`16
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 17 of 19 PageID# 17
`
`91.
`
`Between March 2015 and July 2018, Mellon received at least $200,000 of
`
`investor funds, in excess of her salary, for payment of personal living expenses and charges to a
`
`corporate credit card.
`
`92. Mellon obtained investor funds described above as part of, and in furtherance of,
`
`the securities law violations alleged above.
`
`93. Mellon has no legitimate claim to these ill-gotten gains, which are proceeds of the
`
`securities fraud alleged above, and it is not just, equitable, or conscionable for her to retain the
`
`funds.
`
`94.
`
`Accordingly, Mellon is liable as a relief defendant and should be required to
`
`disgorge all ill-gotten gains which inured to her benefit under the equitable doctrines of
`
`disgorgement, unjust enrichment, and/or constructive trust.
`
`PRAYER FOR RELIEF
`
`WHEREFORE, the Commission respectfully requests that this Court enter a final
`judgment:
`
`I.
`
`Permanently restraining and enjoining Defendants Boice and Trustify from violating
`
`Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Section 10(b) of the Exchange Act
`
`[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5];
`
`II.
`
`
`
`Ordering Defendants Boice and Trustify to disgorge any and all ill-gotten gains, together
`
`with prejudgment interest, derived from the activities set forth in this Complaint.
`
`III.
`
`
`
`Ordering Defendants Boice and Trustify to pay civil penalties pursuant to Section 20(d)
`
`of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §
`
`
`
`17
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 18 of 19 PageID# 18
`
`78u(d)(3)];
`
`IV.
`
`
`
`Ordering Relief Defendant Mellon to disgorge all ill-gotten gains to which she does not
`
`have a legitimate claim that she received as a result of the conduct alleged in the Complaint,
`
`together with prejudgment interest thereon;
`
`V.
`
`Ordering Relief Defendant GoLean to disgorge all ill-gotten gains to which it does not
`
`have a legitimate claim that it received as a result of the conduct alleged in the Complaint,
`
`together with prejudgment interest thereon; and
`
`VI.
`
`Granting such other and further relief as the Court may deem just and appropriate.
`
`JURY DEMAND
`
`
`
`Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, the Commission hereby
`
`requests that this case be tried to a jury.
`
`
`
`
`
`
`
`Respectfully submitted,
`
`SECURITIES AND EXCHANGE COMMISSION
`
`
`
`/s/ Nicholas C. Margida
`Nicholas C. Margida
`Virginia Bar No. 73176
`Securities and Exchange Commission
`100 F Street, NE
`Washington DC 20549-5977
`Telephone: (202) 551-8504
`Fax: (202) 772-9292
`Email: margidan@sec.gov
`
`
`
`
`By:
`
`
`
`
`
`Dated: July 24, 2020
`
`
`
`
`
`18
`
`

`

`Case 1:20-cv-00853-TSE-JFA Document 1 Filed 07/24/20 Page 19 of 19 PageID# 19
`
`Jennifer Chun Barry (Pro hac vice to be filed)
`Karen M. Klotz (Pro hac vice to be filed)
`
`Securities and Exchange Commission
`
`1617 JFK Boulevard, Suite 520
`Philadelphia, PA 19103
`Telephone: (215) 597-3100
`Email: barryj@sec.gov
`
`klotzk@sec.gov
`
`
`
`19
`
`

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