A gaming entrepreneur has been charged with defrauding investors in his Kizzang digital sweepstakes startup of about $9 million, some of which he allegedly spent on his own gambling sprees.
The U.S. Securities and Exchange Commission said Robert Alexander enticed more than 50 people to invest in Kizzang by making false statements about its business prospects and stole at least $1.3 million to pay for personal expenses, including more than $400,000 on gambling at casinos in Las Vegas in Illinois.
On one occasion, the SEC said in a civil complaint, Kizzang had only $5,500 in its bank account when it received a $30,000 investment. Alexander allegedly lost about $9,500 of the money at a casino only three days later.
According to the complaint, Alexander told investors they would make a minimum of 10 times their investment and falsely represented to them that their money would be used solely for business purposes. He notified investors in November 2017 that Kizzang was “hopelessly insolvent.”
“Alexander promoted Kizzang as an opportunity for investors to profit from the early success of a technology start-up,”Carolyn Welshhans, associate director in the SEC’s Division of Enforcement, said in a news release. “In reality, Alexander brazenly converted investor proceeds for his personal use, sometimes within days of receiving investor funds.”
Alexander, a veteran of the gaming console business, founded Kizzang in 2013, telling investors that it offered free online sweepstakes, with consumer traffic being monetized through advertising and sponsorships.
Over the next four years or so, he raised about $9 million from investors, including $501,000 from one individual to whom he had allegedly represented that “he had personally invested millions of dollars in Kizzang, and that he had made a charitable donation of $50 million to a prominent Los Angeles hospital.”
Alexander “did not donate any funds, let alone $50 million, to the hospital,” the SEC said.
The complaint also says Alexander provided another investor with a phony spreadsheet that reflected, among other expenditures, $9,992 for a hotel charge. The money had actually been spent at a casino, according to the SEC.
Federal prosecutors have also charged Alexander with fraud in a parallel criminal case.