WASHINGTON — The Securities and Exchange Commission has leveled serious accusations against two Florida residents, alleging they swindled investors out of $125,000 through a fraudulent litigation finance operation. The father-son duo of Michael Chhabra and Vineet “Vincent” Chhabra are now facing legal action initiated by the SEC in a federal court. The lawsuit claims they misappropriated funds intended for supporting legal battles into their own lavish lifestyles.
According to federal regulators, the Chhabras deceitfully promised investors lucrative returns through investments in their firm, Tort Fund LLC, which was purportedly established to fund law firms engaged in mass tort litigation against various manufacturers. However, it is alleged that not a dime went to these purported legal battles; instead, the funds were diverted to cover personal expenses ranging from rent and food to travel.
Documents revealed in court suggest the investment pitch by Tort Fund LLC involved utilizing specialty purpose vehicles to pool investor resources. Sophisticated online marketing strategies including promotions on platforms like Facebook were employed to attract investors to what was presented as a secure and profitable opportunity. Unfortunately, none of these promises were kept, as not only did the company fail to fund any legal cases, it also failed to engage in legitimate business agreements with any law firms, as initially claimed.
Further delving into their deceptive practices, the SEC highlighted that roughly $40,000 of the investor funds was used to drive the deceit further, paying off individuals tasked with drawing in more investors to their scheme. Additionally, allocatable amounts were purportedly spent on litigation fees intended to mollify a bankruptcy proceeding against Michael Chhabra, as well as efforts to sanitize his online reputation. Mundane expenditures including dining out, groceries, and even retail shopping were also covered using misappropriated investor funds.
The response from Tort Fund LLC to investor inquiries about their investments was equally disheartening, according to the SEC. As scrutiny heightened, the company’s attentiveness to maintaining its website, a social media footprint, and even functional communication channels like email, noticeably declined.
The regulatory body has asked the court for stringent retributive measures against the Chhabras and their company. These include the disgorgement of all ill-gotten gains from their operation, payment of civil penalties, and a permanent ban preventing the Chhabras from holding director or officer roles in any company that files reports under the Exchange Act.
This legal action arrives in the wake of another litigation financing-related complaint filed by the SEC earlier this week, spotlighting a California woman accused of orchestrating a $7 million Ponzi scheme that preyed predominantly on Filipino American investors. This case, too, involves promises of funding personal injury litigations, highlighting a concerning trend of fraud within the litigation finance industry.
The SEC remains vigilant in its efforts to clamp down on financial misconduct, especially those exploiting the burgeoning sector of litigation finance. The ongoing cases underscore the necessity of stringent oversight and due diligence in investment activities, particularly in industries that may appear to offer outsized returns. The outcome of this lawsuit could set important precedents for how similar cases are handled in the future, signaling the SEC’s commitment to protecting investors from fraudulent financial schemes.