On February 26, 2019, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint in California federal court alleging that movie writer-director, Daniel Adams (“Adams”), and his music producing partner, Michael Flanders (“Flanders”), defrauded at least two investors out of tens of thousands of dollars.
In early 2016, Adams and Flanders allegedly convinced two people to invest $160,000 in their film production companies, Spiderworx Media LLC and An L.A. Minute LLC, which in 2018 released a film entitled, “An L.A. Minute.”
Then in August 2016, Adams told one of the alleged fraud victims via email that he and partner Flanders each invested $85,000 of their own money into the movie, “An L.A. Minute.” However, the two partners had never put a penny into the movie venture. Also, Adams and Flanders represented that they would not access the investors' money until bank financing had been raised, which ultimately never happened. Nevertheless, the investors money was utilized, and “An L.A. Minute” grossed only $5,004.
The SEC is also accusing Adams of lying as to how investors' money would be spent, claiming that Adams told one investor that the $60,000 provided would be used exclusively to pay attorneys. In fact, according to the SEC, Adams received $21,062, Flanders got $18,500 and only $20,000 went to an attorney.
A second investor claims Flanders made up a fake e-mail showing a phony money wire transfer of $200,000 invested by another “investor” to lure him into investing his initial $100,000. The second victim forked over the $100,000, of which Adams pocketed $29,000, Flanders kept $10,000, and the rest was used for the movie, according to the SEC's complaint.
The SEC claims that the two moviemakers raised millions to make the movie — $1 million in 2015 alone through the sale of securities. Then from July 2015 through September 2016, Adams and Flanders raised another $400,000 via unsecured loan agreements from nine investors.
Adams previously pleaded guilty to tax fraud and larceny in 2012, was ordered to pay nearly $4.4 million in restitution to the state of Massachusetts and served a 21-month prison term.
The SEC is seeking an injunction barring the two from conducting further unregistered securities transactions, disgorgement of ill-gotten funds and other penalties.
The SEC is represented in-house by Amy J. Longo and William S. Fiske.
Adams, Spiderworx Media LLC, and An L.A. Minute LLC are represented by Jonathan Schwartz of The Law Offices of Jonathan Schwartz.
Flanders is represented by Sincerai Stallings of The Stallings Law Firm LLC.
The case is the Securities and Exchange Commission vs. Daniel R. Adams et al., case number 2:19-cv-01412, in the U.S. District Court for the Central District of California.
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