SEC Charges Media Company And Its CEO With Defrauding Investors

On April 17, 2024, the Securities and Exchange Commission (SEC) filed charges against Icaro Media Group, Inc. ("Icaro") and its CEO, Paul H. Feller ("Feller"), for allegedly engaging in a multimillion-dollar offering fraud.

Summary Of The Case

During the Relevant Period from 2017 to 2021, Defendant Feller, along with Icaro, engaged in a scheme to defraud investors by soliciting investments based on false representations regarding business partnerships with two multinational telecommunication companies, referred to as "Telco 1" and "Telco 2." Feller allegedly made fraudulent misrepresentations about Icaro's relationships with these telcos to attract investors.

Feller's actions, as described, constitute a clear case of securities fraud. By repeatedly providing false information to potential investors about Icaro's partnerships and product launches with Telco 1 and Telco 2, Feller deceived investors and induced them to invest in the company under pretenses.

The fact that Icaro had not launched, nor was poised to launch, any products with either Telco during the Relevant Period demonstrates the extent of the deception. Furthermore, the termination of trial projects with Telco 1 before the Relevant Period, coupled with the lack of engagement with Icaro about relaunching another product during the Relevant Period, contradicts Feller's claims and underscores the fraudulent nature of his statements.

Feller's actions, as described, further demonstrate the extent of the fraudulent conduct perpetrated by him and Icaro. By falsely claiming that launches with Telco 2 were imminent, and even stating that a launch had occurred when it had not, Feller continued to mislead investors about the company's business prospects.

Additionally, Feller's misrepresentations regarding high-profile business leaders coming in as strategic investors compound the deceit perpetrated against investors. By falsely claiming the involvement of these individuals, Feller sought to enhance the perceived credibility and attractiveness of Icaro as an investment opportunity.

Feller engaged in a pattern of deceptive practices aimed at attracting investment capital under false pretenses. Such behavior not only violates securities laws but also undermines trust in the financial markets and exposes investors to unnecessary risk.

Violations

The violations alleged in the document are serious and fall under securities laws. Specifically, the defendants are accused of violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. These laws are designed to prevent fraud and misrepresentation in the sale or trading of securities.

The complaint suggests that unless the defendants are restrained and enjoined, they may continue engaging in similar acts of fraudulent conduct. Thus, legal action is being pursued to prevent further harm to investors and to uphold the integrity of the securities market.

Relief Sought

The SEC is taking legal action against the defendants for alleged violations of federal securities laws. The SEC is seeking various forms of relief through a final judgment from the court:

It seeks to permanently enjoin the defendants from further violating the federal securities laws and rules as alleged in the complaint. This injunction aims to prevent future misconduct by the defendants.
The defendants are ordered to disgorge all ill-gotten gains they obtained as a result of the alleged violations. This includes any profits made through fraudulent activities. Prejudgment interest may also be imposed on the disgorged amount.
Defendants are required to pay civil money penalties as a consequence of their actions. These penalties serve as a financial punishment for the violations and as a deterrent against future misconduct.
Feller, specifically, may be permanently prohibited from serving as an officer or director of any company with securities registered under the Exchange Act or required to file reports under the Exchange Act. This is aimed at preventing individuals involved in securities fraud from holding positions of authority in publicly traded companies.
The SEC seeks any other relief that the court deems just and proper in the circumstances of the case. This could include additional remedies to address the harm caused by the defendant's actions or to further prevent future violations.

Defendants

The defendants involved in this case are:

1. Icaro

Originally incorporated as Sport 195, Inc. in June 2009 in Nevada, the company changed its name to SKYY Digital Media Group, Inc. in June 2016. Subsequently, in June 2020, VOS Digital Media Group, Inc. acquired SKYY, and in August 2020, VOS changed its name to Icaro. Collectively, these entities are referred to as the "predecessor entities." Icaro is headquartered in New York, New York. It's important to note that Icaro has not engaged in any registered offerings of securities, and none of its securities are registered with the Securities and Exchange Commission (SEC).

2. Feller

Aged 59, Feller resides in Santa Barbara, California. He serves as the Chairman and CEO of Icaro. Before Icaro's formation, Feller held various executive positions with the predecessor entities. Additionally, Feller is a 50% co-owner, Managing Partner, and Acting Chairman of the Americas of Cronus Equity, LLC ("Cronus").

Facts Of The Case

Case Background

The following section outlines the background and history of Icaro, its predecessor entities, and the involvement of Feller:

I. Company History

Icaro, originally founded in 2009 as Sport 195, claimed to be the world's first global online sports platform offering a vast repository of sports data and information. In 2015, Feller was appointed Acting Chairman and CEO of Sport 195, which later changed its name to SKYY in June 2016.

On December 19, 2017, Feller resigned as CEO of SKYY. Subsequently, in February 2019, he was appointed CEO of VOS. Later in 2019, Feller initiated plans for VOS to acquire SKYY. By October 2019, Feller was re-appointed as CEO of SKYY, serving concurrently as CEO of both VOS and SKYY until VOS completed the acquisition of SKYY in June 2020.

Then, in August 2020, VOS officially changed its name to Icaro.

Further, Icaro and its predecessor entities focused on developing digital platforms and smartphone apps designed to aggregate sports news from the internet and personalize it for individual customers. The revenue generation strategy involved customizing these platforms to meet the specific needs of partners, including telecommunications companies (Telcos) and other smaller partners. This customization included creating branded websites and smartphone apps marketed to the partners' subscribers.

II. Company History

During the Relevant Period, Icaro conducted capital raises totaling over $22 million from at least 38 external investors. These raises were conducted through a series of private offerings, wherein investors were promised significant growth in both revenue and stock value, which later turned out to be false.

Feller, in his pitches to potential investors, outlined a revenue strategy for Icaro. He claimed that the company's digital platforms and smartphone apps, which were supposedly pre-loaded onto mobile phones, would attract substantial user traffic. This traffic, according to Feller, would result in millions of dollars in advertising revenue and other income, which would be shared between Icaro and the Telcos with whom they purportedly had partnerships.

Prospective investors were provided with revenue forecasts, investor presentations, and other materials by Feller. These materials falsely touted imminent launches with the Telcos as the primary drivers of Icaro's revenue projections.

However, despite these claims, the actual revenue generated by Icaro during the relevant years was significantly lower than what was represented to investors. The company reported only $271,379 in total revenues in 2015 and 2016 combined, followed by no revenues from 2017 to 2019. In 2020, Icaro reported only $3,632 in revenues, $50,000 in 2021, and $127,000 in 2022. These figures starkly contrasted with the rosy revenue projections presented to investors, indicating a substantial discrepancy between the promises made and the actual performance of the company.

Defendants Made False And Misleading Statements To Investors Regarding Icaro’s Relationships With Telco 1 and Telco 2

The statements made by the defendants regarding Icaro's relationships with Telco 1 appear to be false and misleading. Here's a breakdown of the key points:

A. Telco 1

i. Before the Relevant Period, Icaro and Telco 1 Attempted to Partner but Those Efforts Failed

Before the Relevant Period, Icaro and Telco 1 attempted to partner, but these efforts failed.
Telco 1 made investments in Icaro in July 2013 and May 2014, becoming Icaro's largest outside shareholder at the time of its investment.
In 2014, Icaro developed webpages for one of Telco 1's subsidiaries. These web pages were active from approximately early 2014 to early 2015.
By 2016, Telco 1 terminated the webpages developed by Icaro for several reasons, including concerns about Icaro's failure to obtain licenses for sports content and difficulties in fulfilling deliverables and meeting launch deadlines.
Additionally, Icaro developed a webpage for a second subsidiary of Telco 1 in 2014, but Telco 1 terminated Icaro's contract for the development and operation of that website sometime in 2016.
By mid-2016, Telco 1 had suspended all business with Icaro, indicating a breakdown in the relationship between the two companies.

These facts suggest that despite previous collaboration attempts, the relationship between Icaro and Telco 1 deteriorated significantly due to various issues, ultimately leading to the termination of contracts and suspension of business by Telco 1. Therefore, any representations made by the defendants about ongoing or prospective partnerships with Telco 1 during the Relevant Period would have been misleading to investors.

ii. Telco 1 Pivoted to Another Content Partner During the Relevant Period

The following section reveals further details regarding the interactions between Icaro and Telco 1, as well as the actions taken by Telco 1 during the Relevant Period:

In January 2017, Telco 1 entered into an exclusive agreement with another sports media company (referred to as "Icaro's Competitor") to provide services similar to those pitched by Icaro to Telco 1. This suggests that Telco 1 opted to pivot towards another content partner, indicating a shift away from further collaboration with Icaro.
Despite the exclusive agreement with a competitor, Icaro continued to pitch products to Telco 1 after January 2017. However, these conversations did not progress beyond the pitch stage, indicating a lack of interest or willingness from Telco 1 to engage with Icaro further.
When pitching products to Telco 1, Icaro repeatedly claimed that it was about to launch a product with Telco 2. However, Telco 1 informed Icaro that it would not consider any future partnerships until Icaro successfully executed a launch with Telco 2. This suggests that Icaro's representations regarding its partnerships and impending launches were not accurate or credible.
Despite claiming readiness to launch products with Telco 1 in multiple markets during the Relevant Period, Icaro did not fully develop, test, or receive approval from Telco 1 for any smartphone apps, websites, or other platforms. This indicates that Icaro's claims of readiness to launch were unsubstantiated, further underscoring the misleading nature of the representations made by the defendants to investors.

iii. Despite Having No Agreement in Place, Defendants Started Touting Imminent Launches with Telco 1

Feller sent multiple emails to potential investors between February 2017 and November 2017, making claims about imminent launches and partnerships with Telco 1. These claims included projections of revenue and user numbers based on partnerships with Telco 1 and Telco 2, despite the lack of concrete agreements or progress in discussions with Telco 1.
In these emails, Feller claimed that Icaro expected to launch its products with Telco 1's subsidiaries in multiple countries, targeting hundreds of millions of potential users. These statements were made without any formal agreement or confirmation from Telco 1.
Feller also falsely indicated the existence of current and signed contracts with various companies, including Telco 1, to potential investors. These claims were made to project significant revenue generation for Icaro, further misleading investors about the company's prospects.
Despite the defendants' assertions of impending launches and partnerships with Telco 1, it's noted that Telco 1 maintained an exclusive relationship with Icaro's competitor from 2017 to early 2023 and did not engage in significant communications with Icaro regarding business opportunities during this period. This indicates that the claims made by the defendants were baseless and not reflective of the actual relationship between Icaro and Telco 1.

Overall, the defendants' actions demonstrate a deliberate effort to mislead investors by portraying partnerships and launches with Telco 1 as imminent and lucrative, despite the lack of substantive agreements or progress in discussions with the telecommunications company.

iv. After Feller Returned to Icaro in Late 2019, He Resumed Making False Statements About Imminent Business with Telco 1

This section reveals a continuation of false statements made by Feller regarding imminent business with Telco 1, despite the lack of concrete agreements or progress in discussions:

February 19, 2020: Feller informed an investor about purported new developments in contracts with Telco 1, claiming that Icaro had over 500 million cell devices under contract with Telco 1's subsidiary and Telco 2's subsidiary.
February 28, 2020: Feller sent an email to contacts, asserting that Icaro had exclusive contracts to launch over 500 million cell phone devices with white-label APs with Telco 1 and Telco 2.
January 26, 2021: Feller shared an Investor Presentation containing a Launch Strategy with planned launches in 2021 for Telco 1 and Telco 2, projecting significant net revenue growth for 2021, 2022, and 2023 based on these partnerships. However, Icaro's actual revenue for 2020 was significantly lower than the projected amount.
March 10, 2021: Feller was involved in an email exchange where an Icaro officer sent revenue projections to Telco 1, including assumptions about potential partnerships. Despite a request from Telco 1 to only include current partnerships, Feller assured them that the projections would be adjusted accordingly.
March 25, 2021: Feller sent another potential investor the same Investor Presentation containing launch dates for Telco 1 and projected net revenue numbers based on partnerships with Telco partners, even after promising Telco 1 that he would remove all assumptions about Telco partnerships from Icaro's projections.

These actions demonstrate a persistent pattern of misleading investors by falsely representing imminent business and revenue opportunities with Telco 1, despite the absence of substantive agreements or discussions with the telecommunications company.

v. Contrary to Feller’s Statements, Telco 1 Never Reinvested in Icaro After 2015

Between 2015 and 2022, Telco 1 did not invest any additional funds in Icaro. This indicates that there were no further financial contributions or investments made by Telco 1 into Icaro during this period.

On March 25, 2021, despite the lack of reinvestment from Telco 1, Feller told a potential investor that Telco 1 made an additional investment in Icaro's latest investment round. This statement by Feller appears to be false and misleading, as it contradicts the factual reality that Telco 1 did not provide any further funding to Icaro during the specified timeframe.

Overall, this discrepancy highlights the misleading nature of Feller's statements to potential investors regarding Telco 1's involvement and investment in Icaro, suggesting a deliberate attempt to inflate the company's perceived value and financial backing.

B. Telco 2

i. Icaro and Telco 2 Attempted to Launch an App Together But Were Stymied by Technical Difficulties

In November 2016, Icaro signed a one-year partnership agreement with a subsidiary of Telco 2, a mobile telecommunications company in Brazil. The agreement aimed to facilitate the development of Icaro's platform for potential distribution by Telco 2.

Following the agreement, Icaro worked on resolving technical issues that arose during the development process. These issues included problems such as loading incorrect content and layout errors for the product. These technical difficulties need to be addressed before the app can be launched successfully.

Overall, despite the partnership agreement between Icaro and Telco 2, the collaboration faced challenges due to technical issues that needed to be resolved before the app could be launched. This suggests that while there was intent to launch the app, the process was hindered by technical difficulties during the development phase.

ii. Despite Not Being Close to Launch, Defendants Repeatedly Claimed That the Launch of Its Product with Telco 2 was Imminent

Despite the actual progress made in the partnership between Icaro and Telco 2, the defendants repeatedly claimed that the launch of its product with Telco 2 was imminent:

February 17, 2017: Feller emailed a corporate deck to a potential investor claiming that the partnership with Telco 2 would go live in March, providing a sports app and website to over 70 million customers of Telco 2's subsidiary.

April 4, 2017: Feller informed a recruiter that Icaro would go live in Telco 2's largest market with the first 90 million smart devices within the next three weeks. Additionally, Feller mentioned preparations for launch dates with Telco 1, projecting to launch 350 million devices in the second quarter of 2017.

April 12, 2017: Feller emailed another individual projecting net revenue of over $1.4 million primarily from partnerships with Telco 1 and Telco 2 in the second quarter of 2017, with a total of over $14 million for 2017.

April 24, 2017: Feller pitched to an investor, claiming that the company already had an addressable market of over 400 million users under signed contracts with global mobile telecom providers, including Telco 1 and Telco 2.

June 7, 2017: Feller wrote to a prospective investor, stating that in June 2017, they would be launching Telco 2 in Brazil as their sports app and website under their brand.

These statements consistently portray an image of imminent launch and significant revenue generation from partnerships with Telco 2 and Telco 1. However, the discrepancy between these claims and the actual progress made in the partnerships suggests a pattern of misleading representation by the defendants.

iii. Icaro Falsely Blamed its Product Launch Delays on Telco 2

Icaro falsely blamed its product launch delays on Telco 2:

1. Amendment to Agreement

By July 2017, Icaro was still unable to launch the product for Telco 2. On July 14, 2017, an amendment was executed between Icaro and Telco 2's subsidiary, extending the terms of the agreement to provide Icaro additional time to address the issues with the application.

2. False Explanation

On August 10, 2017, Feller wrote to a potential investor, falsely attributing the delay in the Telco 2 launch to technology issues on Telco 2's side. He claimed that the launch was delayed by one fiscal quarter but assured the investor that they would go live with Telco 2's subsidiary on August 28th, and revenue would start flowing immediately.

By falsely attributing the launch delays to Telco 2's technology issues, Icaro sought to shift responsibility away from itself. However, the extension of the agreement and the ongoing delays suggest that the issues were likely on Icaro's end rather than Telco 2's. This behavior indicates a pattern of misleading representation by Icaro and its executives regarding the status of its partnerships and product launches.

iv. In the Fall of 2017, Defendants Continued to Make False Statements About Imminent Launches of Products with Telco 2

The defendants continued to make false statements about imminent launches of products with Telco 2:

September 20, 2017: Feller wrote to a potential investor, claiming that Icaro would be launching with Telco 2 in Brazil as their sports app and website, expecting to become the number one sports app in Brazil within 12 to 18 months.

October 24-31, 2017: Telco 2's subsidiary conducted a simulation to test Icaro's demonstration version of the Android smartphone app. Technical issues, such as loading delays and layout errors, were identified during this simulation.

October 26, 2017: Feller informed the Recruiter that Icaro had gone live with the Telco 2 app. However, shortly after, Feller admitted to launch delays due to technology issues.

November 3, 2017: Despite knowing about the launch delays, Feller emailed a potential investor, projecting over USD 16 million in net revenue from the partnership with Telco 2 by the end of 2018.

These actions demonstrate a persistent pattern of falsely representing imminent launches and revenue projections associated with the partnership with Telco 2. Despite encountering technical issues and experiencing launch delays, the defendants continued to mislead investors about the status and potential profitability of the partnership.

v. In 2018, Icaro Struggled to Fix Issues with Its Product for Telco 2

The following are the struggles faced by Icaro in fixing issues with its product for Telco 2:

January 9, 2018: Icaro released a smartphone app for Telco 2 to the Google Play Store. However, Telco 2 never approved that version of the smartphone app, and a public launch of the app by Telco 2 never occurred.

January 18, 2018: Employees of Telco 2 expressed concerns internally about issues including the inability to test or use the smartphone app on Apple phones due to Icaro's iOS app not being approved by Apple, and slow loading of content. Additionally, concerns were raised about the aggressive assumptions in Icaro's business plan needing alignment with reality.

February 2018: Icaro launched another flawed employee demonstration for Telco 2's subsidiary, indicating ongoing issues with the product.

June 14, 2018: Telco 2 extended its agreement with Icaro a second time, providing an extension until June 1, 2020, to allow Icaro more time to resolve technical problems with the product and to obtain licenses for its content.

End of 2018: Telco 2's subsidiary determined that it could not use Icaro's unlicensed content and proposed using content provided by another Telco 2 subsidiary on Icaro's platform. However, Icaro declined this proposal, indicating a disagreement between the parties regarding content licensing.

These instances demonstrate the ongoing challenges and difficulties faced by Icaro in delivering a functional and licensed product for Telco 2, despite multiple attempts and extensions provided by Telco 2.

vi. In Connection with Raising Money for the Merger of SKYY and VOS, Defendants Admitted that no Telco 2 Product Had Launched to Date and Misrepresented Telco 2’s Position

Defendants admitted certain truths regarding the status of their relationship with Telco 2 while also misrepresenting Telco 2's position:

Admission of No Product Launch

In an email sent by Feller in August 2019 to investors seeking funds to save Icaro, Feller acknowledged that no product had ever launched with Telco 2. He stated that Telco 2 was on the brink of canceling the contract with Icaro, emphasizing that the agreement had not gone live to date.

Misrepresentation of Telco 2's Position

Despite acknowledging the lack of product launch with Telco 2, Feller told investors in the same email that Telco 2 would continue the contract as long as VOS stepped in to operate. He further stated that Telco 2 would expand the contract to include various sectors like sports, breaking news, finance, wellness, and fashion. However, this representation was false, as Telco 2 did not condition the continuation of its contract with Icaro on VOS's involvement, nor did they have conversations about expanding the contract with Icaro.

These actions illustrate a mix of truth and misrepresentation by the defendants regarding the status of their relationship with Telco 2, likely aimed at persuading investors to provide funds to save Icaro.

vii. Defendants Continued to Make False Statements About Their Business Dealings with Telco 2 between 2019 to 2021

Defendants continued to make false statements about their business dealings with Telco 2 between 2019 to 2021:

September 26, 2019: Feller informed two business contacts about finding investors, claiming that an extended agreement with Telco 2 was being signed that day to expand the sports app agreement. However, no contract was actually signed with Telco 2 on that date.

October 1, 2019: Feller wrote to a potential investor, stating that Icaro had contracts with both Telco 1 and Telco 2 to launch a white-label sports app. He projected significant revenue from the Telco 2 agreement, despite the lack of evidence supporting these claims.

October 16, 2019: Feller told a prospective investor that he was meeting with the President of Telco 2 and others to finalize launch dates and expand the contract. However, Telco 2 has no records of any emails, meetings, or calendar invitations between Feller and Telco 2 in 2019, indicating that these statements were false.

These actions demonstrate a continued pattern of false representations regarding the status of the business dealings with Telco 2, aimed at attracting investors by overstating the company's relationships and revenue projections.

viii. In 2020, Icaro Continued to Attempt to do Business with Telco 2, but Telco 2 Terminated its Agreement with Icaro

The following information illustrates the continued attempts of Icaro to engage in business with Telco 2 in 2020, despite the termination of their agreement:

January 2020: An Icaro employee reached out to representatives from Telco 2's subsidiary about a potential opportunity for new business. Although representatives from Telco 2's subsidiary met with Icaro representatives, they declined to move forward.

February 14, 2020: Telco 2's subsidiary informed Icaro of its intention to terminate the agreement.

February 19, 2020: Despite the termination notice from Telco 2, Feller informed an investor about supposed developments with their contracts with Telco 2, including preparations for the launch of the first 40 million cell phone devices. Feller also claimed that Icaro had over 500 million cell devices under contract with Telco 1 and Telco 2.

February 28, 2020: Feller wrote to a business contact, asking them to share with a potential investor that Icaro had exclusive contracts to launch over 500 million cell phone devices with Telco 1 and Telco 2.

July 9, 2020: Icaro and Telco 2 officially terminated their contract, retroactive to June 2020.

On January 26, 2021: Feller sent a potential investor a January 2021 Investor Presentation containing a “Launch Strategy” with a series of planned launches in 2021 that included Telco 2.

These actions demonstrate a persistent effort by Icaro, particularly by Feller, to portray ongoing and lucrative business dealings with Telco 2 to investors, despite the reality of terminated agreements and unsuccessful negotiations.

C. Defendants’ Statements To Investors Regarding Telco 1 and Telco 2 Were False and Misleading.

The following statements outline a series of false and misleading representations made by the defendants, particularly Feller, regarding their business dealings with Telco 1 and Telco 2:

False representations of imminent launches

Feller falsely claimed to potential investors that partnerships with Telco 1 and Telco 2 were about to launch or were already live, despite knowing or disregarding that no such launches were imminent.

Misrepresentation of contracts and investments

Defendants misrepresented the existence of contracts with Telco 1, investments from Telco 1, and the number of cell phone devices under contract with Telco 1, despite knowing or disregarding the lack of such agreements.

Fabrication of revenue projections

Defendants distributed false revenue projections based on non-existent or unsuccessful partnerships with Telco 1, deceiving potential investors about the financial prospects of Icaro.

Blaming launch delays on Telco 2

Defendants falsely attributed delays in product launches to Telco 2, concealing the real reasons behind the delays, such as failure to obtain necessary licenses and unresolved technical issues.

Claiming live launches and ongoing contracts

Defendants continued to deceive potential investors by claiming that products for Telco 2 were live or that contracts were still in place, even after being informed of termination notices from Telco 2.

Overall, these actions demonstrate a pattern of deceitful behavior aimed at attracting investment by misleading investors about the status and prospects of Icaro's partnerships with Telco 1 and Telco 2.

Statements About Alleged CEO Investors

A. Sportswear CEO

The statements made by Feller regarding the alleged investment from the Sportswear CEO are concerning and indicate a pattern of false representation:

Solicitation of investment: Feller solicited investment from the Sportswear CEO, implying that the CEO was interested in investing in Icaro.

Misleading potential investors: Feller falsely represented to potential investors that the Sportswear CEO was in the process of investing in Icaro, listing him as a lead strategic investor, despite knowing or disregarding that the CEO had expressed disinterest in investing.

Continued false representation: Feller persisted in listing the Sportswear CEO as a pending investor in communications to potential investors, even after receiving a cease and desist letter from the CEO's attorneys, indicating that the CEO had never invested in Icaro and had not authorized the use of his name for soliciting investments.

These actions demonstrate a deliberate effort to mislead potential investors by falsely associating the Sportswear CEO with investment in Icaro. Such misrepresentation could have influenced potential investors' decisions and constitutes deceptive conduct.

B. Personal Finance CEO

Similar to the case with the Sportswear CEO, Feller's actions regarding the Personal Finance CEO's potential investment raise concerns about misrepresentation and deceptive conduct:

Unsubstantiated claims: Feller reached out to the Personal Finance CEO about potentially investing in Icaro without receiving any indication of interest from the CEO.

False representation to potential investors: Despite not receiving any response from the Personal Finance CEO, Feller listed the CEO as a pending investor in communications to potential investors, suggesting that there was interest in investing.

Continued pursuit without indication of interest: Feller persisted in trying to solicit investment from the Personal Finance CEO, even following up with the CEO's business contact and indicating a desire to have the CEO onboard.

These actions create a false impression of investor interest and could mislead potential investors about the level of support and backing for Icaro. Such misrepresentation may influence investors' decisions and constitute deceptive conduct.

C. Statements To Investors About CEO Investors Were False and Misleading

Indeed, Feller's statements to potential investors about the involvement of the Sportswear CEO and the Personal Finance CEO in investing in Icaro were false and misleading. Despite lacking any commitment or indication of interest from these CEOs, Feller represented them as pending investors, which could have misled potential investors about the level of support and credibility behind Icaro. Moreover, the formal demand from the Sportswear CEO's representatives to cease using his name in investor solicitation emails underscores the deceptive nature of Feller's actions in this regard. These misrepresentations could have influenced investors' decisions and perceptions about Icaro's investment prospects, constituting fraudulent conduct.

Investor Monies To Feller Through His Entity Cronus

The transfer of investor funds from Icaro to Cronus, Feller's entity, raises serious concerns about the handling of investor monies. While some payments were purportedly for salary and consulting fees, the substantial amounts transferred to Cronus and subsequently dissipated by Feller for personal benefit indicate potential misappropriation of investor funds. This raises questions about transparency, accountability, and the fiduciary responsibilities owed to investors. Such actions could constitute breaches of trust and regulatory violations, warranting further investigation and potential legal consequences.

Tolling Agreements

The tolling agreements signed by Icaro and Feller with the Commission effectively paused the running of the statute of limitations for any potential actions brought by the Commission from July 15, 2021, to January 15, 2024. This means that during this period, the Commission retained the option to pursue legal actions against Icaro and Feller for any alleged misconduct or violations of securities laws without being constrained by the statute of limitations.

SEC Seeks Relief From The Court

The Commission respectfully petitions the Court to:

Issue Final Judgments permanently restraining Defendants and their representatives, employees, and attorneys, as well as anyone actively collaborating with them, from directly or indirectly breaching Securities Act Section 17(a), Exchange Act Section 10(b)
Issue Final Judgments instructing Defendants to return all unlawfully obtained gains they received either directly or indirectly, along with pre-judgment interest accrued, as a result of the alleged infringements, under Exchange Act Sections 21(d)(3), 21(d)(5), and 21(d)(7)
Issue Final Judgments instructing Defendants to pay civil monetary penalties under Securities Act Section 20(d) and Exchange Act Section 21(d)(3)
Issue a Final Judgment permanently preventing Feller from serving as an officer or director of any company with a class of securities registered under Exchange Act Section 12 or that is mandated to file reports under Exchange Act Section 15(d) under Securities Act Section 20(e) and Exchange Act Section 21(d)(2)

Key Takeaways For The Investors

For investors, there are several key takeaways from this case:

Due Diligence is Crucial

It's essential for investors to conduct thorough due diligence before investing in any opportunity. This includes researching the company's background, its management team, financial statements, and any claims made about partnerships or product launches

Verify Claims Independently

Investors should independently verify any claims made by companies seeking investment. In this case, false claims were made about partnerships with multinational telecommunication companies and the involvement of high-profile business leaders. Independent verification could have uncovered the truth behind these claims.

Beware of Red Flags

Investors should be wary of red flags such as unrealistic promises of imminent product launches or partnerships with major companies. In this case, repeated claims of impending launches with Telco 2 despite significant obstacles should have raised concerns.

Understand Securities Laws

Familiarizing oneself with securities laws and regulations can help investors recognize signs of potential fraud. Securities fraud, as demonstrated in this case, can lead to significant financial losses for investors and legal consequences for those involved.

Report Suspected Fraud

If investors suspect fraudulent activity or securities violations, they should report their concerns to the appropriate regulatory authorities. Timely reporting can help prevent further harm to investors and facilitate enforcement actions against wrongdoers.

Gayatri GuptaApril 24, 2024

Nasdaq Compliance

The Nasdaq Stock Market features three tiers of listed companies, namely: (1) The Nasdaq Global Select Market, (2) The Nasdaq Global Market, and (3) The Nasdaq Capital Market. These tiers are characterized by progressively stringent listing requirements, with the Nasdaq Global Select Market setting the highest standards for initial listings and the Nasdaq Capital Market serving as the entry-level tier, particularly suitable for most small-cap issuers.

To list securities on Nasdaq, a company must fulfill minimum listing requirements, encompassing defined criteria related to financial performance, liquidity, and corporate governance. Nasdaq retains extensive discretion in the listing process and reserves the right to reject an application, even if the technical prerequisites are satisfied, if it deems such denial essential to safeguard the interests of investors and the public.

After securing a listing on Nasdaq, a company is obligated to adhere to ongoing listing standards. To initiate the listing process, a company seeking inclusion on Nasdaq must diligently complete and submit a comprehensive listing application to Nasdaq. This application should include specific documents and information as outlined by Nasdaq's requirements.

Typically, the application process spans a duration of four to six weeks. Once the application is submitted, a Nasdaq analyst is designated as the primary liaison with the company. Within two to three weeks of submission, the company can expect to receive an initial comment letter. The comment and review process persists until a decision is reached on the approval or denial of the application. Similar to filing with the SEC, a meticulously prepared Nasdaq application tends to attract fewer comments and facilitates a more streamlined process. Generally, the company's securities counsel assumes a leading role, serving as the primary contact for preparing the application and engaging in communication with Nasdaq.

Similarly to the SEC review process, Nasdaq conducts a thorough examination of publicly accessible information pertaining to a company. This encompasses, but is not limited to, SEC filings, the company's website, management communications and speeches, as well as press releases. The iterative nature of the review process typically doesn't necessitate a formal protocol, and communication is commonly facilitated through email correspondence and phone calls.

Listing Criteria For Nasdaq
For a company to list its securities on Nasdaq, it must satisfy the following criteria:

Specific Initial Requirements:
- Quantitative Standards: Meeting defined thresholds for both quantitative and qualitative factors.
- Qualitative Standards: Fulfilling certain qualitative benchmarks.
Continuing Requirements:
- Quantitative Criteria: Adhering to ongoing quantitative benchmarks.
- Qualitative Criteria: Maintaining specified qualitative standards.

The initial quantitative thresholds are typically set at a higher level than those required for continued listing. This distinction aims to ensure that companies achieve a sufficient level of maturity before being listed. Additionally, Nasdaq imposes rigorous corporate governance standards that listed companies must adhere to throughout their tenure on the exchange.

Before formally submitting a comprehensive listing application, a company has the option to pursue a preliminary listing eligibility review. In this stage, the Listing Qualifications Staff conducts a thorough examination of the company's public filings to assess its compliance with numerical listing requirements. Additionally, the team evaluates the company's adherence to corporate governance requirements outlined in the Marketplace Rules ("Rules"). This preliminary review provides valuable insights into the company's eligibility for listing on Nasdaq before committing to the full application process.

Upon completion of the preliminary review, the Listing Qualifications Staff will make an assessment regarding whether the company meets the numerical listing criteria. Additionally, any corporate governance or regulatory concerns raised during this phase will be considered to determine their impact on the listing approval. It's important to note that while the preliminary review provides insights, final approval necessitates the submission of a formal listing application. This application undergoes a thorough examination by the NASDAQ Listing Qualifications Staff. Furthermore, the final approval process involves satisfactory compliance with specific qualitative reviews. This includes an examination of the regulatory history of the company's officers, directors, and significant shareholders. Meeting these criteria is integral to obtaining the final approval for listing on Nasdaq.

Financial And Liquidity Requirements

    Requirements

    Equity Standard
    Market Value of Listed Standard
    Net Income Standard

    Listing Rules

    5505(a)
and
5505(b)(1)
    5505(a)
and
5505(b)(2)
    5505(a)
and
5505(b)(3)
    
    Stockholders Equity

    	$5 million
    	$4 million
    	$4 million
    
    The market value of publicly held shares

    $15 million
    $15 million
    $
      5 million
    
    Operating History

    	Two years
    N/A
    N/A
    
    The market value of listed securities

    N/A
    $50 million
    N/A
    
    Net income from continuing operations (in the latest fiscal
a year or in two of the last three
fiscal years)

    N/A
    N/A
    $750,000
    
    Publicly held shares

    	1 million
    	1 million
    	1 million
    
    Bid Price

    	$4
    	$4
    	$4)
    
    Closing Price

    	$3
    	$2
    	$43
    
    Corporate Governance

    Yes
    Yes
    Yes
    
    Total Shareholders

    300
    300
    300

Corporate Governance Requirements

Across all three tiers of the Nasdaq Stock Market, corporate governance requirements remain largely consistent. The categories encompassing corporate governance standards include:

Distribution of Annual or Interim Reports
Independent Directors
Audit Committee
Compensation Committee
Nomination of Directors
Code of Conduct
Annual Meetings
Solicitation of Proxies
Quorum
Conflict of Interest
Shareholder Approval
Voting Rights

These governance elements play a crucial role in ensuring transparency, accountability, and ethical conduct within listed companies, irrespective of the specific tier within the Nasdaq Stock Market.

Companies seeking listing on Nasdaq must adhere to specific corporate governance standards, including the following:

Compensation Committee with Independent Directors:
- The company is required to establish a compensation committee comprised of independent directors.
- The committee must consist of at least two members.
- Rule 5605(d)(2)(A) introduces an additional independence test for compensation committee members.
Responsibility for Executive Compensation:
- The compensation committee is tasked with determining or recommending to the entire board the compensation of the chief executive officer (CEO) and all other executive officers.

These standards are designed to ensure a level of independence and scrutiny in the decision-making processes related to executive compensation within the company.

The Application And Documents

The Nasdaq application package encompasses several key components:

Symbol Reservation Form:
- Used to request the reservation of a specific trading symbol for the company.
Listing Application:
- Requires supplemental documents and details about the company's financials, operations, and other pertinent information.
Listing Agreement:
- A formal agreement outlining the terms and conditions of the listing on Nasdaq.
Corporate Governance Certification:
- A certification affirming the company's commitment to meeting Nasdaq's corporate governance standards.
Initial Application Fee:
- Payable via check or wire transfer, this fee is a prerequisite for initiating the listing process.
Logo Submission Form:
- Used for submitting the company's logo for use in Nasdaq's materials.

These application forms are completed through the Nasdaq website listing center, utilizing the online platform to facilitate the submission of supplemental and supporting documents. It is advisable to thoroughly review all required paperwork in advance, ensuring that the necessary information is readily available before initiating the application process.

Symbol Reservation Form

The symbol reservation form is a concise, one-page electronic form where applicants input information for Nasdaq's consideration. Nasdaq symbols, limited to 1-5 characters, adhere to guidelines established by the Intermarket Symbols Reservation Authority (ISRA). The ISRA system is designed to organize symbols efficiently, prevent duplication, and reduce programming and operational complexities. The ISRA operates within the framework of the NMS Symbology Plan, a plan utilized by Nasdaq.

Key details about the symbol reservation process:

Symbol Choices:
- The form allows applicants to propose three symbol choices in order of preference.
- While Nasdaq generally honors the first choice if available, it retains the authority to assign, rescind, or reassign a trading symbol at its discretion.
ISRA and Nasdaq Authority:
- The ISRA and Nasdaq have overarching authority in managing the assignment of symbols.
Additional Information:
- The form captures essential details about the issuer and the planned public offering.
- Information may include the name of the attorney, lead underwriter (if applicable), CEO and CFO names, yearly revenues, company website, and the sector in which the company operates.

Completion of this symbol reservation form initiates the process of securing a trading symbol on Nasdaq, and it's essential to provide accurate and comprehensive information to facilitate this stage of the listing application.

The Application

The Nasdaq listing application process is comprehensive and varies based on the circumstances surrounding the listing sought. There are twelve distinct listing applications catering to different situations, including changes of control, switches from other exchanges or markets, spin-offs, and initial public offerings (IPOs). Each application, spanning approximately seven pages, collects detailed information about the company, covering areas such as address, contact and billing details, securities attorney and auditor information, transfer agent particulars, and the company's officers and directors. Specific information on the company's securities, including type, par value, and cusip number, is also required.

Furthermore, the application mandates disclosure of legal proceedings involving the company, its officers or directors, or significant shareholders over the past ten years. This encompasses inquiries, investigations, lawsuits, litigation, arbitrations, and other legal and administrative proceedings. Documents supporting the backup and final disposition of these matters must be provided.

Regarding private offerings within the prior six months, including bridge financings, shelf registrations, and Regulation S offerings, the company is required to disclose such activities. Additionally, the application delves into the company's background, posing questions to ensure compliance with seasoning rules.

While Nasdaq retains the right to request relevant supporting documents, specific documents are mandatory based on the application type. For an uplisting from an existing U.S. market, the application must include letters from three market makers confirming their commitment to making a market in the subject securities. Other required documents include a listing agreement, a logo submission form, a corporate governance certification form, regulatory correspondence over the past 12 months, and shareholder confirmation documents. Nasdaq often seeks confirmation from the company's transfer agent regarding the eligibility of the security for the direct registration program (DRS).

During the review of an up listing application, Nasdaq may request additional information, such as a Broadridge share range analysis and NOBO list, a certified shareholder list, details about mitigating any going concerns or opinions, income statement and/or balance sheet projections for the next 12 months, and confirmation of Sarbanes Oxley Section 302 and 906 certifications by the company, among other inquiries related to compliance and financial matters.

The Listing Agreement

The Listing Agreement is a concise document, spanning two pages, serving as a formal affirmation of the company's commitment to adhere to all rules and regulations set forth by the Nasdaq Stock Market. It includes provisions for indemnifying and holding Nasdaq harmless from liability. Notable points in the agreement include:

Compliance Assurance:
- The company explicitly agrees to comply with all rules and regulations stipulated by the Nasdaq Stock Market.
Indemnification Clause:
- The company indemnifies Nasdaq, meaning it undertakes to compensate or reimburse Nasdaq for any losses or damages incurred. This includes harm resulting from third-party trademark infringement claims related to the company's symbol and logo, as well as Nasdaq's use of the same.
Disclaimer of Warranty and Liability:
- The agreement contains a disclaimer of warranty and liability against Nasdaq for trading issues, with the exception of those resulting from gross negligence or willful misconduct.

This agreement establishes a clear framework for the relationship between the listed company and Nasdaq, emphasizing the company's commitment to regulatory compliance while providing indemnification for certain specified matters and delineating the scope of Nasdaq's liability.

Corporate Governance Certification Form

The corporate governance certification form certifies compliance with the governance requirements related to an audit committee, director nomination process, compensation committee, board composition, executive sessions, quorum, and codes of conduct. Where an exemption applies, the form requires specification of the exemption terms. The document specifies the different rules and exceptions in a check-the-box format.

Logo Submission Form

The logo submission form contains the guidelines for the logo and affirms Nasdaq’s rights to use the same. Nasdaq uses company logos in its marketing materials, on the MarketSite Video Wall and Tower, and websites.

Fees

Entry fees are based upon the aggregate number of shares to be listed at the time of initial listing, regardless of class, with a maximum cap of $75,000. Fees are assessed on the entry date in The Nasdaq Capital Market, except for $5,000, representing a non-refundable application fee. This fee must be submitted with the company’s application.

Nasdaq does not charge application or entry fees for any securities transferred from a national securities exchange.

Benefits Of Trading On An Exchange

There are many benefits to trading on an exchange instead of the OTC Markets. The most significant benefits to a business are the ability to attract analyst coverage and institutional investors and the corresponding increase in liquidity that comes with both. Stocks that trade on Nasdaq tend to have a lower bid/offer spread — again encouraging trading volume and liquidity. Exchange-traded securities are exempt from the penny stock definition, allowing more market maker and broker-dealer participation. As further explained below, a broker-dealer cannot recommend a penny stock transaction to its retail clients. Therefore, no analysts, financial advisors, or institutional investors make recommendations for purchases of penny stocks.

As an aside, this is one of the reasons that OTC Markets created the OTCQX market tier, which does not list penny stocks. It is also why the small-cap industry is pushing for a supported valid venture exchange (for further reading.

In today’s world, depositing stock and/or trade-in non-exchange traded securities is increasingly difficult. Despite the congressional efforts and SEC rulemaking in support of small-cap capital formation (for example, the JOBS Act, including the emerging growth company regulations, new Regulation A+ and Title III Crowdfunding and the new FAST Act), through enforcement and investigative proceedings, both the SEC and FINRA continue to apply pressure on broker-dealers, clearing firms and transfer agents to reduce the secondary trading and free flow of penny stocks. For more information on difficulties in depositing stocks.

Further On Penny Stocks

NASDAQ and NYSE MKT traded securities are exempted from the definition of a “penny stock” due to the initial and ongoing listing standards. Penny stock rules focus on broker-dealers’ activity in effectuating trades in penny stocks. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (the “Penny Stock Act”) prohibits broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The rules promulgated thereunder, particularly Exchange Act rules 15g-1 through 15g-100 (the “penny stock rules”).

Section 15(h) of the Exchange Act provides that no broker or dealer may effectuate a customer’s purchase or sale of any penny stock unless such broker or dealer.

Approves the customer for the specific penny stock transaction and receives a written agreement to the transaction from the customer.
Furnishes the customer a risk disclosure document describing the risks of investing in penny stocks.
Discloses to the customer the current market quotation, if any, for the penny stock, including the bid and ask prices and the number of shares that apply to such bid and ask prices.
Discloses to the customer the amount of compensation the firm and its broker will receive for the trade.

In addition, after executing the sale, a broker-dealer must send its customer monthly account statements showing the market value of each penny stock held in the customer’s account.

Moreover, brokers and dealers subject to the penny stock rules are subject to additional disclosure requirements outlined in Rules 15g-2 through 15g-9. For my information on penny stocks and the rules affecting broker-dealer activity.

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