Tech Firm Sungame Corp. And Former CEO Neil Chandran Charged With Securities Fraud, Grand Larceny And Forgery
Attorney General Eric T. Schneiderman announced today the unsealing of a multi-count indictment charging Freevi Corp., d/b/a Sungame Corp. (“Sungame”), and former Sungame Chief Executive Officer Neil Chandran in an alleged scheme to steal hundreds of thousands of dollars from unwitting investors by soliciting investments in computer tablets which supposedly were able to display content in 3D. Sungame is a publicly-traded Las Vegas, Nevada-based technology firm trading under symbol “SGMZ.
Chandran’s alleged scheme brought in hundreds of thousands of dollars from a single victim in 2014 alone, resulting in a Nassau County grand jury indicting Chandran on felony charges of Grand Larceny and Forgery, as well as securities fraud under the Martin Act. If convicted, Chandran faces up to 15 years in prison. The Attorney General’s investigation into Chandran’s potential theft of millions of dollars from dozens of other victims throughout New York State is ongoing.
“New Yorkers should not have to worry that their investments are being used to fund elaborate securities fraud schemes,” said Attorney General Schneiderman. “My office will vigorously pursue those individuals and corporate entities whose greed threatens the fairness, order, and efficiency of the markets.”
According to statements made by the prosecutor at arraignment, beginning on or around July 1, 2013, and continuing through to the present, Chandran induced unsuspecting investors into agreeing to purchase Tablets at $1,000 per unit with the promise that the full purchase price would be returned in the form of a no-risk rebate typically within several weeks of purchase (the “Investment”). In addition, Chandran further incentivized investors by offering both a so-called “education grant” consisting of 50% of the purchase price as well as the opportunity to allow Sungame to buy back the Tablet, who would thereafter resell it, and remit the profits to the investor. Accordingly, Chandran represented that every $1,000 Tablet purchase would entitle an investor to: (1) a full return of their investment principle; (2) an “education grant” equal to 50% of their investment; and (3) the option to either keep the Tablet or receive the profit once Sungame re-sold it to an end-user.
However, also according to statements made by the prosecutor at arraignment, the overwhelming majority of these investors received neither their return of investment capital nor their profit, as promised. Instead, their investment capital was allegedly utilized by Chandran for the undisclosed and improper purpose of artificially inflating Sungame’s publicly-reported corporate earnings, funding the manufacture of additional Tablets so as to promote the investment to yet more unwitting investors, to repay those investors who had previously provided investment capital, and for the improper and undisclosed purpose of paying Chandran’s personal and corporate liabilities.
In August 2014, when Sungame’s over-inflation of reported corporate earnings came to light, Sungame’s stock price plummeted from a high of approximately $35.00 as of April 2014 to $1.50 per share in November 2014. Sungame stock is currently valued at approximately $0.07 per share.
The indictment unsealed today involves a single Nassau County, New York resident who was introduced to Chandran and his investment opportunity during the winter of 2014. Based upon alleged misrepresentations made by Chandran, the investor made an initial investment of $400,000 in April 2014 and a subsequent $66,000 investment in August 2014. In an effort to pacify the investor, Chandran is alleged to have presented the investor with a fraudulent stock certificate purporting to show an ownership interest in a corporation that had ceased to exist almost two years prior to the date of issuance. To date, the investor has received no return of his investment.
Chandran and Sungame are both currently charged with two counts of Grand Larceny in the Second Degree (a Class “C” Felony) and one count of Securities Fraud under the Martin Act (a Class “E” Felony); Chandran is also charged with one count of Forgery in the First Degree (a Class “C” Felony) and one count of Criminal Possession of a Forged Instrument in the First Degree (a Class “C” Felony).
Chandran was apprehended at the Los Angeles County Airport by U.S. Customs and Border Patrol personnel after returning to United States from Hong Kong. Chandran, 45, and Sungame were arraigned today in Nassau County Supreme Court before the Honorable Judge Meryl Berkowitz. Bail for Chandran was set at $1 million bond or $500,000 cash. The charges against the defendants are allegations and they are presumed innocent until proven guilty in a court of law.
In addition to the crimes charged in Nassau County, the Attorney General’s investigation into Chandran’s activities has also uncovered evidence of other alleged criminal conduct in other regions of New York State and elsewhere. Anyone who believes that they may be a victim of this scheme is urged to contact the Attorney General at 212-416-8731. The charges are merely accusations, and the defendants are presumed innocent unless and until proven guilty in a court of law. Attorney General Schneiderman thanked the Office of the Nevada Attorney General for their valuable assistance on this investigation, including Criminal Investigator Todd Grosz, as well as the Los Angeles Police Department. The OAG investigation was conducted by Investigators Brian Metz and Ryan Fannon. The Supervising Investigator is Sylvia Rivera and the Deputy Bureau Chief is John McManus. The Investigations Division is led by Chief Investigator Dominick Zarrella.