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April 3, 2018 | last updated April 3, 2018 1:05 pm

SEC charges Michael Liberty with $48M scheme to defraud investors

Photo / Mozido
Photo / Mozido
Michael A. Liberty, a well-known developer and entrepreneur from Gray who now lives in Florida, faces a federal lawsuit filed Friday in Portland by the Securities and Exchange Commission alleging that he and others engaged in a $48 million scheme to defraud investors in his fintech startup now known as Mozido Inc.

Statement on behalf of Michael Liberty

The following statement was issued by Jay Dubow, attorney with Pepper Hamilton LLP of Philadelphia, on behalf of Michael A. Liberty:

"On behalf of Michael A. Liberty, we are dismayed that the SEC has chosen to file this groundless complaint.

"We are reviewing the 66-page complaint. Mr. Liberty will vigorously defend himself through the court system, including filing an Answer to the complaint. It will deny most of the substantive allegations based on both factual and legal deficiencies in the SEC's pleading.

"We anticipate the day when Mr. Liberty's name is cleared. The SEC has unfairly targeted him with regard to this investigation for over six years. It has contacted investors, customers, financial institutions and others, resulting in the loss by Mr. Liberty and Mozido, a corporation of which he is a substantial shareholder, of a number of business opportunities."

The Securities and Exchange Commission has charged Michael Liberty, a Gray native and founder of the fintech startup now known as Mozido Inc., with a scheme to trick hundreds of investors into investing in his shell companies instead of Mozido.

In a suit filed Friday in Portland, the SEC alleges that Liberty, his wife Brittany Liberty, his attorney George Marcus, his cousin Richard Liberty, and his cousin's friend Paul Hess induced investors to purchase unregistered interests in shell companies controlled by Michael Liberty that supposedly owned transferrable interests in Mozido. The SEC alleges that Liberty and his accomplices stole most of the more than $48 million raised "to fund a lavish lifestyle that included private jet flights, multi-million dollar residences, expensive cars and movie production ventures," the SEC's press release said.

"In reality, the shell companies either did not own or were not permitted to transfer interests in the company," the SEC stated in its news release.

The SEC also alleges that Michael Liberty and his accomplices lied to investors about Mozido's valuation and finances, the amount Michael Liberty had personally invested in Mozido and the use of their funds.

According to the complaint, Michael Liberty and his accomplices later orchestrated a series of transactions in which they used investors' own money to heavily dilute their interests and duped investors into trading securities for those worth more than 90% less.

"As alleged in our complaint, these investments were sold as a chance to get in early with a seemingly promising fintech company," said Paul Levenson, director of the SEC's Boston regional office. "The prospect of investing in a non-public start-up company may hold considerable allure, but buyers need to understand what they are buying. Unscrupulous operators make it difficult for ordinary investors to assess such 'investment opportunities.'"

The SEC's complaint, filed in federal court in Portland, charges the defendants with violating the anti-fraud and registration provisions of the federal securities laws.

The litigation is being led by Marc Jones, Peter Bryan Moores, Trevor Donelan and Kevin Currid of the Boston office.

Liberty's legal woes

Michael A. Liberty, 57, who grew up in Gray and now lives in Windermere, Fla., was at one time a prominent developer in Portland, including the 1987 development of the 195,000-square-foot office building 100 Middle St., which sold in 2015 for $35.3 million.

He was sentenced last August to four months in prison after pleading guilty to making illegal political contributions between May and June 2011 in a case investigated by the Federal Bureau of Investigation. As Mainebiz reported at the time, Liberty also was ordered to pay a $100,000 fine and was required to serve one year of supervised release for illegally making political contributions in the names of others to then-presidential candidate Mitt Romney's primary campaign committee.

The Bangor Daily News reported today that Liberty was released from federal prison in January.

In January, three low-income and senior housing companies with ties to developer Michael Liberty filed for Chapter 11 reorganization, the BDN reported at that time.

The BDN identified the three companies as:

  • Pine State Housing Series LLC, owner of 435 units of housing at 17 sites across Maine, reported it has between $10 million and $50 million in assets and liabilities and less than $43,000 in unsecured debt. Its largest unsecured debt, the newspaper reported, is to Stanford Management.
  • Montfort Housing LP, which owns 140 apartments at the base of Munjoy Hill in Portland, and owes nearly $2.5 million to creditors that include Stanford Management, Maine State Housing Authority, the Portland Water District and Michael Liberty. Its assets are worth $6.7 million, the newspaper reported.
  • Birch Ridge LP, which owns The Birches senior housing in Old Orchard Beach and reported more than $6.6 million in assets and $135,000 in debt.
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