Americans were duped into buying duff radio frequencies for $12.4m that they had hoped to sell to cellphone networks for double-digit returns, a US financial watchdog has claimed.
The Securities and Exchange Commission (SEC) has accused [PDF] Arizona-based Janus Spectrum of tricking investors into thinking they were acquiring the rights to chunks of valuable spectrum space – frequencies that could be later sold for a hefty price to telcos deploying mobile broadband.
In reality, the SEC alleges, Janus Spectrum and its owners David Alcon and Kent Maerki, along with 11 fundraising companies, were using the money to buy licenses for a cheap 800MHz band typically used for "push-to-talk" comms, which is useless for mobile broadband. The commission said Janus and its operators took the money (worth £8.36m, AU$16.2m) between May 2012 and October 2014.
As per FCC rules, no cellular data services can operate in that particular 800MHz band, so it has very limited commercial appeal.
In short, investors who thought they were getting into the multi-billion dollar world of wireless spectrum deals were instead sold a dated tech best used for coordinating pizza delivery.
The financial watchdog claims:
Major wireless carriers cannot use this particular spectrum to operate their cellular systems. Instead, this spectrum is most typically used for small scale push-to-talk services, such as those used by local law enforcement or small businesses such as pizza delivery companies.
"In these offerings, defendants misled investors by promising that their investments would yield substantial returns through the sale or lease of the FCC licenses to major wireless carriers, when in fact, defendants knew or were reckless or negligent in not knowing that the FCC licenses, if obtained, could never be sold or leased by any major wireless carriers," the SEC added in its legal complaint.
"Defendants further concealed the actual costs associated with obtaining these FCC licenses, and pocketed substantial sums of investor moneys for their own, undisclosed, uses."
In full, the SEC is charging Janus Spectrum, its owners and four other individuals running the eleven fundraising companies, with violating the US Securities Act of 1933 and the Securities Exchange Act of 1934 in the district of Arizona. The legal filing is dated Monday, April 6. The watchdog wants the defendants to pay back the money and a fine.
A spokesperson for Janus Spectrum was unavailable at time of publication. ®