NL- So if i read this correctly, Gonty collected close to a million, and has to pay less than a $25,000 fine? Our U.S. justice system at work. Stuff like this disgusts me.
STATE OF WASHINGTON
DEPARTMENT OF FINANCIAL INSTITUTIONS
1. Tyler Gonty (“Gonty”), a Washington resident, is the Manager and Chief Executive Officer
of T&H Northwest, LLC.
2. T&H Northwest, LLC (“T&H”), a Washington limited liability company, doing business as HellHouse Media (“HellHouse”), is purportedly in the business of producing and selling adult movies, websites, and merchandise.
Nature of the Conduct
3. Beginning no later than September 2006 and continuing through at least June 2009, Gonty, through T&H, raised in excess of $700,000 from over 80 investors, including Washington residents. Gonty offered investors: (1) stock in T&H; (2) promissory notes issued by T&H: and (3) participation interests in specific movie and website productions. Investors learned of the investment opportunity through
advertisements that Gonty placed on the websites, seattleweekly.backpage.com and craigslist.com.
4. Gonty told at least one investor that based that his investment in a movie could return 120% a year upon the prior year’s performance. Gonty also provided the investor with pro forma income statements for T&H stating that in 2008, T&H had a net income of -$197,826 but that the 2009 projected income was nearly $1,000,000, and the projected income for 2012 was over $4,000,000. The investor subsequently
invested $10,000 for 20% of the revenue of a specific movie that T&H would produce. The investor also invested $17,000 for 10% of the revenue of two websites produced by T&H, and $25,000 for a 6% ownership interest in T&H.
5. Gonty provided a money-back guarantee to at least one other investor who invested more than $37,000 for a 50% ownership interest in four websites. Gonty signed four separate Asset Investment Agreements for the websites stating that he personally guaranteed the return of the investor’s investment. Additionally, Gonty promised that in the event that the website was ever sold, the investor would receive half of the sales proceeds, with a minimum return of more than twice the amount that was invested.
6. Another investor invested $90,000 in T&H after being promised a return of 10% per week and 5% ownership interest in a specific website. According to the promissory note signed by Gonty, the investor could request the return of their investment funds just fourteen days after their initial investment.
7. Most T&H investors invested in the production of a specific movie or website. Investors were entitled to a percentage of the revenue from the movie or website depending on how much they invested. According to the HellHouse website, in 2009, a $1,000 investment would purportedly return approximately $100 per month (an annualized rate of return of 120%). The website further stated that the production time for a movie was approximately 120 days from planning to release. On multiple occasions, the movies described in the offerings were not actually produced and the investor’s participation interests were transferred to another movie that was to be produced by Gonty.
8. In April 2009 a Securities Division investigator responded via email to a T&H advertisement on the seattleweekly.backpage.com website seeking investors for an “Award Winning Adult Media Company.” The advertisement stated that T&H “is one of the fastest growing in the business, with more that 3 years of established profit and growth…” The investigator later received a response from Gonty directing him to an advertisement on the HellHouse website that described the investment offering. According to offering documents on the HellHouse website, T&H was attempting to raise $500,000 from investors. The offering documents stated that investors had the option of investing in specific projects (movies, websites, and products) or in shares of T&H.
9. Several T&H investors have received little or no return on their investment. Gonty told at least one investor that if the investor filed suit against him for non-payment, that he would file for bankruptcy.
Misrepresentations and Omissions
10. The Respondents failed to disclose material information to investors about the investment opportunities described above, including but not limited to, financial statements, the basis and assumptions underlying the financial projections provided to investors, the use of investors’ funds, and past investment performance.
11. Additionally, the Respondents made misleading statements to investors about profitability of T&H and the movies and websites that it produced. Furthermore, Gonty failed to disclose the basis on which he could personally guarantee their investment.
12. Respondent, T&H Northwest, LLC is not currently registered to sell securities in the state of Washington and has not previously been so registered.
13. Respondent, Tyler Gonty is not currently registered as a securities salesperson or broker-dealer in the state of Washington and has not previously been so registered.
Based upon the Findings of Fact, the following Conclusions of Law are made:
CONCLUSIONS OF LAW
1. The offer or sale of the stock, promissory notes, and participation interests, as described above, constitutes the offer or sale of a security as defined in RCW 21.20.005(14) and (17).
2. The offer and/or sale of said securities were made in violation of RCW 21.20.010, the anti-fraud statute, because, as set forth in the Findings of Fact, Respondents made untrue statements of material fact, and omitted to state material facts necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading.
3. Tyler Gonty has violated RCW 21.20.040 by offering or selling said securities while not registered as a securities salespersons or broker-dealers in the state of Washington.
4. The offer or sale of said securities is in violation of RCW 21.20.140 because no registration for such offer or sale is on file with the Securities Administrator.
Based upon the foregoing and finding it in the public interest:
IT IS HEREBY ORDERED that Tyler Gonty and T&H Northwest, LLC and their agents and employees shall each cease and desist from offering and/or selling securities in any manner in violation of RCW 21.20.140, the section of the Securities Act of Washington requiring registration.
IT IS FURTHER ORDERED that Tyler Gonty and T&H Northwest, LLC and their agents and employees shall each cease and desist from violating RCW 21.20.010, the anti-fraud section of the Securities Act of Washington.
IT IS FURTHER ORDERED that Respondent Tyler Gonty and his agents and employees shall each cease and desist from violating RCW 21.20.040, the broker-dealer and securities salesperson registration section of the Securities Act of Washington.
IT IS FURTHER ORDERED that Respondents Tyler Gonty and T&H Northwest, LLC shall be jointly and severally liable for and shall pay a fine of $20,000.
IT IS FURTHER ORDERED that Respondents Tyler Gonty and T&H Northwest, LLC shall be jointly and severally liable for and shall pay investigative costs of $2,500.