Fraud litigation filed by the U.S. Securities and Exchange Commission over a Nevada gold mining operation conducted by an out-of-state company was settled recently, possibly opening the door for the accused company's investors to pursue their losses in civil court. The head of the company, which is called Nekekim Corp., agreed to pay a $50,000 penalty and step down from managing the business.
According to the federal government, Nekekim attracted more than $16 million from around 600 investors over a decade, with many shareholders investing more than once. Nekekim and the defendant, who served as the company's president and CEO, attracted investors by claiming that it had licensed a new type of gold extraction from a physicist that it was going to use on a "complex ore" at the business' mine in Southern Nevada.
In fact, the findings of the labs used by Nekekim to discover the "complex ore" were questionable and the "physicist" had no scientific credentials. But investors were not told any of that, the SEC said. Also, instead of taking a salary, the CEO borrowed money from the capital that Nekekim raised and used it for himself. He reportedly has not repaid any of the loans, which add up to about $2.2 million.
There is a good chance that many of the defrauded investors will consider taking legal action against Nekekim and the former CEO to collect their damages. Whether they will do so likely depends on several factors, including whether the business has any assets to go after.
Source: VEGAS INC, "Head of mining company settles SEC fraud charges," Eli Segall, Jan. 3, 2013
· Our law firm represents businesses in Nevada who are dealing with commercial litigation. For more information, please visit our Nevada business litigation page.