May 28, 2019
On May 15, 2019, the SEC announced an emergency asset freeze against online auction portal Collectors’ Café and its CEO, Mykalai Kontilai for orchestrating a $23 million fraudulent scheme.
According to the Litigation Release, the SEC filed a Complaint in the U.S. District Court for the Southern District of New York claiming that Collectors’ Café and Kontilai operated a $23 million scheme defrauding at least 140 investors since April 2014. Collectors’ Café and Kontilai falsely represented that the funds would be used to develop a website and affiliated social network and television show for the auction of collectibles including sports memorabilia. They allegedly stated that the café had hundreds of dealers signed up to sell billions of dollars of inventory. Collectors’ Café and Kontilai also made false representations that it owned a $36 million asset with two contracts signed by Jackie Robinson, the first African American to play major league baseball, when they only owned a fraction of the assets.
The SEC also alleged in the Complaint that Kontilai misappropriated $6 million in investor funds by funneling it through his personal bank account to pay for luxury expenses and other personal expenses to Collectors’ Café credit and debit cards. He allegedly attempted to conceal the fraud by fabricating documents to the SEC, including documents that purportedly showed that Kontilai loaned millions of dollars to Collectors’ Café.
The SEC Complaint charges Kontilai and Collectors’ Café with violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, disgorgement plus prejudgment interest and penalties.