Lancaster Beverage Company Ordered to Pay $12.7 Million for Alleged Investor Fraud
A Lancaster-based beverage company that catered to women has been instructed by the U.S. Securities and Exchange Commission (SEC) to pay approximately $12.7 million to the federal government. The company, SHE Beverage Co., allegedly deceived thousands of investors in order to fund the extravagant lifestyles of its top executives. The SEC also disclosed that final judgments were obtained against three individuals involved in the fraud: CEO Lupe Rose, Vice President Sonja F. Shelby, and COO Katherine E. Dirden. The alleged fraudulent activities took place between 2017 and 2019.
CEO Lupe Rose Faces Separate Criminal Charges
CEO Lupe Rose, in addition to the ordered payment, is currently awaiting trial for a separate case where she has been charged with 38 counts of securities fraud and one count of providing false statements to federal investigators.
Vice President Sonja F. Shelby and COO Katherine E. Dirden Also Held Accountable
Vice President Sonja F. Shelby and COO Katherine E. Dirden have each been directed to pay $334,842 as part of the SEC's ruling. According to the SEC lawsuit filed in federal court, the three defendants raised over $15 million through unregistered stock sales. They assured investors that 30% of the proceeds would be used to purchase beverage inventory, but in reality, only 2% of the funds were spent for that purpose.
Misappropriation of Funds for Personal Use
The SEC suit revealed that the defendants misappropriated about $7.5 million, which amounts to roughly half of the offering proceeds. The funds were allegedly used for personal expenses such as luxury retail goods, rent, cars, trucks, and trips to casinos. The SEC further alleges that the defendants engaged in aggressive fundraising by inflating and misrepresenting SHE's revenues.
False Claims and Concealed Information
Among the alleged false claims made by the defendants, they touted SHE's bottled water as "proprietary" and "FDA approved," despite it being neither. They also claimed to have received acquisition offers worth millions of dollars when no such offers were ever made. Additionally, the defendants falsely boasted about acquiring a cannabis-related company without disclosing that it was obtained from one of the defendant's sisters, and had no independent valuation or operational presence. The SEC also revealed that the defendants falsely asserted that SHE had established its own brewery, even though the construction had not been completed.
Defrauding Investors across Multiple States
The defendants reportedly solicited investors from various states through digital platforms, accepting payments in the form of cash, checks, credit cards, and electronic transfers. However, the SEC noted that SHE's stock offerings were not registered with the commission, leaving investors unaware of the company's actual financial standing.
Analyst comment
Negative news. The Lancaster company defrauded investors and misappropriated funds for personal expenses. Executives ordered to pay fines. The market may react negatively to the company’s fraudulent activities and lack of transparency, impacting investor confidence.
