SEC Charges Sale Leaseback Program Distributors With Defrauding Investors of $5 Million

The U.S. Securities and Exchange Commission charged Anthony Lotito, Joseph Hagan and their respective entities, Revolution Leasing & Administration LLC and ScryptMob II LLC, for their fraudulent offer and sale of unregistered securities, and for misappropriating money from investors. The complaint also charges Hagan and Lotito with acting as unregistered brokers in connection with the sales of these securities.

The SEC’s complaint alleges that through their entities, Lotito raised more than $2 million from retail investors November 2019 to July 2021, and Hagan raised more than $3.1 million from retail investors July 2019 through August 2020. Many of the investors were older adults and some of whom invested through their individual retirement accounts.

According to the complaint, the defendants sold interests in a sale leaseback program known as the Apex Program. The Apex Program purported to use “Apex Packs” machines that mined bitcoin and performed other technology-related functions such as “high speed data processing, computational power, 3D rendering, and [AI] programming.”

To promote investment in the Apex Program, Hagan and Lotito created and distributed offering documents to retail investors, including service agreements that described the Apex Program as an opportunity for investors to generate passive income by purchasing Apex Packs from one subsidiary, Subsidiary #1, of a public company (Apex Program Parent Company) and immediately leasing the Apex Packs to a second Apex Program Parent Company subsidiary, Subsidiary #2, that would pay the investor lease payments ranging between $300 and $500 per month per unit for 36 months to 60 months.

According to the complaint, Hagan and Lotito each knew, or they recklessly disregarded from at least April 27, 2020, that there were problems with the Apex Program, including that there were significant delivery delays with the Apex Packs, which were necessary to generate the passive income for investors, and that monthly lease payment amounts to investors had been drastically reduced by as much as 80%. The Apex Program ceased to operate completely on or about Sept. 10, 2020, but Lotito continued to offer and sell purported investments in the Apex Program from October 2020 until July 2021.

The complaint further alleges that Hagan and Lotito misappropriated investor funds to pay for personal expenses. According to the complaint, interests in the program were not registered with the SEC.

The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, charges all defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and defendants Lotito and Hagan with violations of Section 15(a) of the Exchange Act. The SEC seeks permanent and conduct-based injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties against all defendants, as well as officer and director bars against Lotito and Hagan.

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